GM profits tumble 90% after subprime mortgage arm losses
GM profits tumble 90% after subprime mortgage arm losses
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: May 4 2007 03:00 | Last updated: May 4 2007 03:00
General Motors' first-quarter earnings shrank almost 90 per cent, with improved automotive operating profits more than offset by heavy subprime mortgage losses at GMAC, the financial services group in which the carmaker has a 49 per cent stake.
Rick Wagoner, GM chief executive, described the quarter as one of "continued progress" in the group's turnround plan. However, the earnings fell well short of analysts' expectations and the shares fell 4.3 per cent to $31.04 in lunchtime trading.
Analysts were especially disappointed with the North American results. Some said they underlined the urgency of further labour concessions in forthcoming contract talks with the US United Auto Workers union.
Referring to North America, Fritz Henderson, chief financial officer, acknowledged that "as we look at it, the market environment is pretty tough."
The latest results highlight GM's growing dependence on fast-growing emerging markets. The Asia-Pacific region, along with the Latin America, Africa and Middle East division, accounted for almost a third of vehicle output over the past three months, up from 28 per cent a year earlier. The trend is set to continue this quarter.
The Latin America, Africa and Middle East division was by far the biggest single contributor to GM's earnings, reporting a record first-quarter profit of $201m (€148m). Global net income tumbled from $602m, or $1.06 a share, to $62m, or 11 cents.
Last year's results included a one-time gain of $395m from the sale of part of GM's stake in Suzuki Motors of Japan. Excluding special items, earnings dropped from $350m to $94m.
GMAC reported a first-quarter loss of $305m on Wednesday, compared with earnings of $495m a year earlier. ResCap, its home-lending unit, lost $901m.
The net loss from GM's core North American automotive arm narrowed from $292m to $46m, owing to savings in healthcare and manufacturing costs, and a more profitable vehicle mix.
Brian Johnson, analyst at Lehman Brothers, said new vehicles' contribution fell short of expectations. "Without substantial labour concessions, meaningful improvements in profitability are unlikely."
Subprime losses wipe out GM profits
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: May 3 2007 13:34 | Last updated: May 3 2007 13:34
General Motors’ first-quarter earnings withered by almost 90 per cent, with improved results from automotive operations more than offset by heavy subprime mortgage losses at GMAC, the financial services group in which the carmaker has a 49 per cent stake.
Rick Wagoner, chief executive, described the quarter as one of “continued progress” in GM’s core automotive business. He cited “progress in our turnaround initiatives” in North America and Europe, and a strong performance in emerging markets such as China, Russia and South America.
The Detroit-based carmaker, which lost its 76 year-old crown as the world’s biggest vehicle manufacturer to Toyota in the first quarter, reported net income of $62m, or 11 cents a share, down from $602m, or $1.06 a share, a year earlier.
Last year’s results included a one-time gain of $395m from the sale of part of GM’s stake in Suzuki Motors of Japan.
Excluding special items, earnings dropped to $94m, or 17 cents a share, from $350m, or 62 cents. Analysts surveyed by Thomson Financial had projected per-share earnings of 87 cents.
Richard Beales examines subprime lending fallout at General Motors
Revenues dropped to $43.9bn from $52.4bn, mostly due to the exclusion of GMAC. GM sold a controlling stake in the financial services company last December to a group led by Cerberus Capital Management. First-quarter automotive revenues were slightly lower at $42.9bn.
GMAC reported a first-quarter loss of $305m on Wednesday, compared with earnings of $495m a year earlier. Its home-lending unit, ResCap, incurred a $901m loss.
The net loss from GM’s ailing north American operations narrowed to $46m from $292m, due to savings in healthcare and manufacturing costs, and a more profitable vehicle mix.
The company ascribed the improved mix to new vehicles, such as the Chevrolet Silverado pick-up truck and GMC Acadia sport-utility vehicle, and to lower sales of discounted vehicles to car-rental companies. First-quarter production in north America fell by 192,000 vehicles.
Net profit at GM Europe fell to $5m from $59m, in spite of record sales volumes and the highest market share in a decade. Sales in Russia more than doubled.
The deterioration in Europe was due to unfavourable product mix, higher material costs and lower gains on commodity hedging.
Net income in the Asia-Pacific region fell to $116m from $492m. Excluding the Suzuki sale, earnings grew to $150m from $97m. Sales volumes rose by about 20 per cent, led by China, India and South Korea, and revenues climbed by 35 per cent.
Earnings from Latin America, Africa and the Middle East set a first-quarter record.
Cash flow from automotive operations stood at $300m for the quarter, a $1.5bn improvement. Liquid reserves totaled $24.7bn on March 31, up from $21.6bn a year earlier, but down from $26.4bn on December 31 2006.
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: May 4 2007 03:00 | Last updated: May 4 2007 03:00
General Motors' first-quarter earnings shrank almost 90 per cent, with improved automotive operating profits more than offset by heavy subprime mortgage losses at GMAC, the financial services group in which the carmaker has a 49 per cent stake.
Rick Wagoner, GM chief executive, described the quarter as one of "continued progress" in the group's turnround plan. However, the earnings fell well short of analysts' expectations and the shares fell 4.3 per cent to $31.04 in lunchtime trading.
Analysts were especially disappointed with the North American results. Some said they underlined the urgency of further labour concessions in forthcoming contract talks with the US United Auto Workers union.
Referring to North America, Fritz Henderson, chief financial officer, acknowledged that "as we look at it, the market environment is pretty tough."
The latest results highlight GM's growing dependence on fast-growing emerging markets. The Asia-Pacific region, along with the Latin America, Africa and Middle East division, accounted for almost a third of vehicle output over the past three months, up from 28 per cent a year earlier. The trend is set to continue this quarter.
The Latin America, Africa and Middle East division was by far the biggest single contributor to GM's earnings, reporting a record first-quarter profit of $201m (€148m). Global net income tumbled from $602m, or $1.06 a share, to $62m, or 11 cents.
Last year's results included a one-time gain of $395m from the sale of part of GM's stake in Suzuki Motors of Japan. Excluding special items, earnings dropped from $350m to $94m.
GMAC reported a first-quarter loss of $305m on Wednesday, compared with earnings of $495m a year earlier. ResCap, its home-lending unit, lost $901m.
The net loss from GM's core North American automotive arm narrowed from $292m to $46m, owing to savings in healthcare and manufacturing costs, and a more profitable vehicle mix.
Brian Johnson, analyst at Lehman Brothers, said new vehicles' contribution fell short of expectations. "Without substantial labour concessions, meaningful improvements in profitability are unlikely."
Subprime losses wipe out GM profits
By Bernard Simon in Toronto
Copyright The Financial Times Limited 2007
Published: May 3 2007 13:34 | Last updated: May 3 2007 13:34
General Motors’ first-quarter earnings withered by almost 90 per cent, with improved results from automotive operations more than offset by heavy subprime mortgage losses at GMAC, the financial services group in which the carmaker has a 49 per cent stake.
Rick Wagoner, chief executive, described the quarter as one of “continued progress” in GM’s core automotive business. He cited “progress in our turnaround initiatives” in North America and Europe, and a strong performance in emerging markets such as China, Russia and South America.
The Detroit-based carmaker, which lost its 76 year-old crown as the world’s biggest vehicle manufacturer to Toyota in the first quarter, reported net income of $62m, or 11 cents a share, down from $602m, or $1.06 a share, a year earlier.
Last year’s results included a one-time gain of $395m from the sale of part of GM’s stake in Suzuki Motors of Japan.
Excluding special items, earnings dropped to $94m, or 17 cents a share, from $350m, or 62 cents. Analysts surveyed by Thomson Financial had projected per-share earnings of 87 cents.
Richard Beales examines subprime lending fallout at General Motors
Revenues dropped to $43.9bn from $52.4bn, mostly due to the exclusion of GMAC. GM sold a controlling stake in the financial services company last December to a group led by Cerberus Capital Management. First-quarter automotive revenues were slightly lower at $42.9bn.
GMAC reported a first-quarter loss of $305m on Wednesday, compared with earnings of $495m a year earlier. Its home-lending unit, ResCap, incurred a $901m loss.
The net loss from GM’s ailing north American operations narrowed to $46m from $292m, due to savings in healthcare and manufacturing costs, and a more profitable vehicle mix.
The company ascribed the improved mix to new vehicles, such as the Chevrolet Silverado pick-up truck and GMC Acadia sport-utility vehicle, and to lower sales of discounted vehicles to car-rental companies. First-quarter production in north America fell by 192,000 vehicles.
Net profit at GM Europe fell to $5m from $59m, in spite of record sales volumes and the highest market share in a decade. Sales in Russia more than doubled.
The deterioration in Europe was due to unfavourable product mix, higher material costs and lower gains on commodity hedging.
Net income in the Asia-Pacific region fell to $116m from $492m. Excluding the Suzuki sale, earnings grew to $150m from $97m. Sales volumes rose by about 20 per cent, led by China, India and South Korea, and revenues climbed by 35 per cent.
Earnings from Latin America, Africa and the Middle East set a first-quarter record.
Cash flow from automotive operations stood at $300m for the quarter, a $1.5bn improvement. Liquid reserves totaled $24.7bn on March 31, up from $21.6bn a year earlier, but down from $26.4bn on December 31 2006.
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