Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

GM slashes earnings forecast (forsees $828 million 1st Qtr loss)
Automotive News ^ | 3/16/05 | Dale Jewett and Jason Stein

Posted on 03/16/2005 10:25:18 AM PST by BurbankKarl

Declining sales and production cutbacks in North America are putting a huge crimp in General Motors’ earnings. That prompted the automaker on Wednesday to slash its expectations for this year.

GM expects to lose about $848 million, or $1.50 per share, in the first quarter excluding special items. In early January, the automaker had said it expected to break even for the quarter.

For the full year, GM now thinks it will post earnings in a range of $565 million to $1.13 billion -- or $1 to $2 per share -- excluding special items. That is a dramatic reduction from its earlier earnings forecast of $2.26 billion to $2.83 billion, or $4 to $5 per share.

In addition, GM foresees a $4 billion swing in its operating cash flow for the year -- from $2 billion to a negative $2 billion.

The automaker blamed lower sales in North America and a shift in the sales mix away from high-profit trucks to lower-profit cars for the earnings falloff.

GM's previous first-quarter earnings expectations were based on North American volume of 1.25 million vehicles. Since then, production schedules have been reduced by approximately 70,000 vehicles.

GM also expects negative operating cash flow in 2005 of approximately $2 billion, before the Fiat settlement and GM Europe restructuring, versus the previous target of positive $2 billion.

"Clearly we have significant challenges in North America. The rest of our automotive businesses, and GMAC, are running in line with, or ahead of, our expectations," said GM Chairman and CEO Rick Wagoner. "But North America is our biggest business, and the key driver of automotive earnings and cash flow. So it's important that we get this business right."

More cutbacks appear to be on the way.

"The competitive environment that we face in North America means we must continue to find ways to reduce our costs and grow revenue," warned GM Vice Chairman and Chief Financial Officer John Devine. "While we have made good progress in reducing costs over the last several years, the projected loss in North America reinforces our need to do much more."

"One of the issues we've had for North America is the increasing drag of health-care costs on North American profitability," Devine added on the conference call with Wagoner.

"I don't have any silver bullets on heath care … but clearly I think the weakening profitability this year has focused on our need to make progress on health care."

GM, the largest private provider of health care in the United States, had warned earlier that its medical expenses would increase by about $1 billion this year.

GM said its other automotive regions and GMAC are all on track to meet or beat their 2005 net income targets.

Euro bonds of GM plummeted after the company announced its profit warning.

Standard & Poor's on Wednesday revised its rating outlook on GM and its finance arm to negative from stable, setting the stage for a downgrade of the world's biggest carmaker to junk status.

A downgrade to junk status would likely significantly raise GM's borrowing costs. GM and its finance arm had about $300 billion in debt at the end of last year.

S&P said it views the rating as "tenuous" and could cut it at any time if it looked like GM was not on a trajectory to improve its financial performance in 2006 and beyond.

Moody's Investors Service and Fitch Ratings, which have GM's debt rated 2 and 3 notches above junk respectively, are likely to reconsider their ratings as well, analysts said.


TOPICS: Business/Economy; News/Current Events; US: Michigan
KEYWORDS: automakers; generalmotors
Navigation: use the links below to view more comments.
first 1-5051-98 next last

1 posted on 03/16/2005 10:25:18 AM PST by BurbankKarl
[ Post Reply | Private Reply | View Replies]

To: BurbankKarl

Brought to you by the UAW.


2 posted on 03/16/2005 10:30:30 AM PST by wideawake (God bless our brave soldiers and their Commander in Chief)
[ Post Reply | Private Reply | To 1 | View Replies]

To: BurbankKarl
Standard & Poor's on Wednesday revised its rating outlook on GM and its finance arm to negative from stable, setting the stage for a downgrade of the world's biggest carmaker to junk status.

Might as well give the bonds the same ratings as the cars. ;)

3 posted on 03/16/2005 10:33:19 AM PST by Mr. Jeeves
[ Post Reply | Private Reply | To 1 | View Replies]

To: wideawake

Management equally guilty. Pontiac recently discontinued their number one selling car, the Grand Am. Chevy discontinued the S-10. Replaced it with the Colorado-a five cylinder. Many balk at this "new" concept. Bubba just ain't sure about a 5 cylinder...


4 posted on 03/16/2005 10:34:13 AM PST by donozark (OLD ARAB SAYING: The dog barks but the caravan moves on.)
[ Post Reply | Private Reply | To 2 | View Replies]

To: wideawake

GM's pension expenses, healthcare costs, bloated bureaucracy, and union woes have all grown too large. It's too much overhead to tack onto the price of cars in a competitive global environment.

That, plus if you try to get a price quote from a dealer for a Corvette on the Chevy.com website you get an error.

5 posted on 03/16/2005 10:34:26 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 2 | View Replies]

To: donozark
"Management equally guilty. Pontiac recently discontinued their number one selling car, the Grand Am. Chevy discontinued the S-10."

...and the Camaro is gone. That model was only selling what, some 100,000 copies a year for how many decades?!

6 posted on 03/16/2005 10:39:02 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 4 | View Replies]

To: Southack

Its not your father's Oldsmobile.


7 posted on 03/16/2005 10:39:57 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 5 | View Replies]

To: BurbankKarl
The main reasons for this failure are not mentioned:

...lousy, overpriced cars and the UAW.

8 posted on 03/16/2005 10:42:20 AM PST by Gritty ("Once you’re talking about taking it back you’ve already lost it"-Mark Steyn)
[ Post Reply | Private Reply | To 1 | View Replies]

To: BurbankKarl

WOW G M losses ? Maybe they can re-coop by "charging" the
marine reservist for parking on the G M lot during weekend
drills. (No BUSH bumper stickers allowed though)..........


9 posted on 03/16/2005 10:43:23 AM PST by lionheart 247365
[ Post Reply | Private Reply | To 1 | View Replies]

To: Gritty

You forgot unimaginative styling, and substandard engineering.


10 posted on 03/16/2005 10:43:41 AM PST by TXBSAFH (Never underestimate the power of human stupidity--Robert Heinlein)
[ Post Reply | Private Reply | To 8 | View Replies]

To: Southack
Heartbreaking to see Camaro, Trans-Am,etc. gone from America. I am old enough to remember when Camaro had 396CID from the factory!

Now even the Oldsmobile is gone. Guess I know now how my dad felt when he lamented the demise of the Studebaker, Packard, etc.

I plan on sticking with US made pickups, but I did sneak a peek at Toyota...I feel so guilty!

11 posted on 03/16/2005 10:43:50 AM PST by donozark (OLD ARAB SAYING: The dog barks but the caravan moves on.)
[ Post Reply | Private Reply | To 6 | View Replies]

To: donozark

FYI..Ford just killed the new T-Bird..


12 posted on 03/16/2005 10:44:35 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 4 | View Replies]

To: ken5050
Ya. They have killed it twice...$40K for a roadster/coup put it up there with Beamer. I did like the "older" T-Bird though. The first victim.

I assume Ford is keeping the Ranger? Haven't heard to the contrary.

13 posted on 03/16/2005 10:48:53 AM PST by donozark (OLD ARAB SAYING: The dog barks but the caravan moves on.)
[ Post Reply | Private Reply | To 12 | View Replies]

To: ken5050

"FYI..Ford just killed the new T-Bird.."

Don't worry, no one will notice!


14 posted on 03/16/2005 10:48:54 AM PST by CSM
[ Post Reply | Private Reply | To 12 | View Replies]

To: Gritty
"The main reasons for this failure are not mentioned: ..lousy, overpriced cars and the UAW."

GM has to pay $2Billion to Fiat and a similar amount to Mitshubitshi, where their program to expand market share globally failed (as their market share of USA cars slipped to under 40% at the expense of primarily Japanese cars). One terrific 10-year snafu, put into place (don't forget) by JACQUES NASSER.

15 posted on 03/16/2005 10:49:00 AM PST by Zuben Elgenubi
[ Post Reply | Private Reply | To 8 | View Replies]

To: wideawake

"Brought to you by the UAW."

The UAW didn't design the beautiful and popular Aztec, didn't terminate the Camaro and Firebird with no replacement.

This is an obviously poorly managed company.

Here is GM management at its best: Years ago Chrysler designed a Concept vehicle that then got built and sold--the PT Cruiser.

GM has now hired the designer of the PT Cruiser, who has almost cloned it for GM. GM will introduce this vehicle.

Nothing original. No risks. No imagination. Declining sales and profits.


16 posted on 03/16/2005 10:49:03 AM PST by truth_seeker
[ Post Reply | Private Reply | To 2 | View Replies]

To: BurbankKarl
The automaker blamed lower sales in North America and a shift in the sales mix away from high-profit trucks to lower-profit cars for the earnings falloff.

The market at work due to higher oil prices. I hope this US manufacturer has learned its lessons from the 1970 oil crisis...

17 posted on 03/16/2005 10:49:14 AM PST by 2banana (My common ground with terrorists - They want to die for Islam, and we want to kill them.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: wideawake

More like brought by higher gasoline prices and lower dollars (in turn partly brought by the UAW.)


18 posted on 03/16/2005 10:49:54 AM PST by Doctor Stochastic (Vegetabilisch = chaotisch is der Charakter der Modernen. - Friedrich Schlegel)
[ Post Reply | Private Reply | To 2 | View Replies]

To: ken5050

It was a stupid, overweight car and deserved to die.


19 posted on 03/16/2005 10:50:07 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 12 | View Replies]

To: BurbankKarl; A. Pole
The automaker blamed lower sales in North America and a shift in the sales mix away from high-profit trucks to lower-profit cars for the earnings falloff.

This is no surprize. When 70% of your economy is consumer spending, and those consumers are losing jobs to outsourcing and immigration, and the lucky consumers who still have jobs are suffering pay cuts combined with tax increases, discretionary spending will decline.

Productivity is higher, and investment returns reflect that, but the investors reaping the benefits are a minority of the population of consumers. The individuals among the investor class aren't going to buy up the surplus vehicles just because they have the extra cash or the cash flow. Foreign markets in China and India haven't opened up as promised to buy up the surplus.

With declining sales, profits will decline. With declining profits, investment in the stocks will decline. With declining demand for the stocks, the stock prices will decline.

That is what happened in the late twenties, and it is happening again.

20 posted on 03/16/2005 10:50:35 AM PST by meadsjn
[ Post Reply | Private Reply | To 1 | View Replies]

To: Zuben Elgenubi

Boy, am I wrong here. Jacques Nasser was CEO with Ford, not GM.


21 posted on 03/16/2005 10:51:22 AM PST by Zuben Elgenubi
[ Post Reply | Private Reply | To 15 | View Replies]

To: Eric in the Ozarks; CSM

It might have had a "retro" niche, but the quality control on the car was awful....absolutely hideous..


22 posted on 03/16/2005 10:51:53 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 19 | View Replies]

To: donozark
Replaced it with the Colorado-a five cylinder. Many balk at this "new" concept. Bubba just ain't sure about a 5 cylinder...

Maybe because it reminds Bubba of a dawg with three legs.

23 posted on 03/16/2005 10:54:14 AM PST by meadsjn
[ Post Reply | Private Reply | To 4 | View Replies]

To: meadsjn
"That is what happened in the late twenties, and it is happening again."

Don't quit your day job.

Ha!

24 posted on 03/16/2005 10:56:34 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 20 | View Replies]

To: meadsjn
Ya. But even three-legged-dogs will hunt. Sometimes...

Just think the whole concept of five cylinder was a bit much for Bubba to absorb so quickly.

25 posted on 03/16/2005 10:57:53 AM PST by donozark (OLD ARAB SAYING: The dog barks but the caravan moves on.)
[ Post Reply | Private Reply | To 23 | View Replies]

To: ken5050

I didn't think it came close to the good looks of the 55-57s, which is what they were trying for.


26 posted on 03/16/2005 10:58:35 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 22 | View Replies]

To: meadsjn
"...those consumers are losing jobs to outsourcing and immigration, and the lucky consumers who still have jobs are suffering pay cuts combined with tax increases..."

Unemployment is low. Taxes are down, not up. Inflation is low. Overall employment is at record levels. Payrolls, salaries, and wages are all up, too.

In contrast, you got *all* of the above wrong. You just batted zero.

27 posted on 03/16/2005 10:59:41 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 20 | View Replies]

To: BurbankKarl

The auto industry is a major leader of the national economy. When autos sag, the economy slows. Which one is the cause and which the effect is not clear, it is somewhat symbiotic. Autos weaken, economy slows, other sectors, including housing follow. The question is how long and how deep the effects.


28 posted on 03/16/2005 11:00:41 AM PST by RightWhale (Please correct if cosmic balance requires.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: wideawake; CSM
Column: Current woes at GM and Ford can be traced to Roger Smith

http://www.mlive.com/business/statewide/rick_haglund/index.ssf?/base/business-0/1110319801129060.xml

Wednesday, March 09, 2005
By Rick Haglund
Considered a visionary leader, retired General Motors Corp. Chairman Roger Smith also was tagged with a truckload of costly corporate sins in what some called his decade-long "reign of error" in the 1980s.

Smith took heat for crippling the economy of Flint by drastically shrinking GM's footprint in its home city. And he spent billions in a futile attempt to diversify the automaker by purchasing Electronic Data Systems Corp. and Hughes Aircraft Co.

GM later sold off EDS and Hughes. But the automaker is still suffering from Smith's failed fantasy of replacing much of its hourly work force with robots and computer-controlled machinery that would churn out cars and trucks without so much as a bathroom break.

The unsurprising result of Smith's plans for fully automated "lights-out" factories: GM faced an enraged work force as the automaker entered negotiations with the United Auto Workers union in 1990.

Robert Stempel, who succeeded Smith as GM chairman that year, decided the only way he could keep labor peace was to sign a historic pact that required GM to pay workers whether or not their plants were operating.

Ford and the former Chrysler Corp. also were forced to sign similar contracts, shifting labor from a variable cost to a fixed cost.

Those fixed labor costs are now making it extremely difficult for GM and Ford to cope with slumping sales.

Earlier this month, GM and Ford announced production cuts in an effort to clear out bloated inventories of unsold cars and trucks.

GM also decided to shut down its Lansing Car Assembly operation months earlier than expected, putting 3,000 workers on temporary layoff.

Analysts would like to see even more plant shutdowns as Ford and GM bleed market share. But the two automakers have been reluctant to do so because they must pay hourly workers whether or not the plants are running.

Here's how the deal works:

Laid-off workers are placed in a "jobs banks" for up to 48 weeks. Drawing unemployment benefits from the government and supplemental unemployment benefits (known as SUB pay) from the automakers, they earn about 95 percent of normal take-home pay, or 70 percent of gross pay.

Ford had 1,092 workers in its jobs bank as of Feb. 27. GM won't release its number.

After 48 weeks, laid-off hourly workers go back on the payroll at full regular pay, regardless of whether there are jobs for them.

GM and Ford have been trying to avoid these costly layoffs by goosing sales with incentives such as zero-percent financing and hefty cash discounts.

But those incentives have been losing steam in recent months, forcing GM and Ford to reluctantly cut production.

Top executives at those automakers no doubt wish that Roger Smith had forged a more cooperative relationship with the UAW.

Contact Rick Haglund at (248) 540-7311 or e-mail him at rhaglund@boothnewspapers.com
29 posted on 03/16/2005 11:01:39 AM PST by wmichgrad ("The only difference between what Senator Kennedy said & a bag of excrement is the bag" Rush 3/2/05)
[ Post Reply | Private Reply | To 2 | View Replies]

To: donozark
"Just think the whole concept of five cylinder was a bit much for Bubba to absorb so quickly."

Introduce the 5 cylinder as an option in the S-10 and it would have done fine. But put it in the new "Colorado" first?! No way.

30 posted on 03/16/2005 11:01:48 AM PST by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 25 | View Replies]

To: Eric in the Ozarks

You're correct..part of the problem was that new model had to be higher, and boxier, to meet the crash impact requirements.


31 posted on 03/16/2005 11:02:22 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 26 | View Replies]

To: truth_seeker

You don't think it will set the world on fire? Does it get 12 mpg like every other truck in the GM fleet?

32 posted on 03/16/2005 11:06:41 AM PST by BurbankKarl
[ Post Reply | Private Reply | To 16 | View Replies]

To: ken5050

If I were a GM stockholder, I'd wring the neck of the guy who did the Fiat deal. Fiats are junk, always have been junk and always will be.


33 posted on 03/16/2005 11:07:46 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 31 | View Replies]

To: RightWhale

I think we are seeing the beginning of the end....

The end of what, I don't know....


34 posted on 03/16/2005 11:07:51 AM PST by BurbankKarl
[ Post Reply | Private Reply | To 28 | View Replies]

To: BurbankKarl

I am making up my sandwich board. The end is near! Sometimes it is even nearer.


35 posted on 03/16/2005 11:09:38 AM PST by RightWhale (Please correct if cosmic balance requires.)
[ Post Reply | Private Reply | To 34 | View Replies]

To: ken5050
My dear husband took me to the dealership to test drive the T-Bird because he was tired of me saying that was the ONLY car I wanted. "Get it", he said.

Ha! I am petite, and still felt like I was sitting in a sardine can. The interior was cheaply constructed and I was very disappointed. So, no T-Bird for me :~)

sw

36 posted on 03/16/2005 11:11:15 AM PST by spectre (Spectre's wife (Hang up and drive))
[ Post Reply | Private Reply | To 12 | View Replies]

To: BurbankKarl

My GMC Sierra gets 17.


37 posted on 03/16/2005 11:11:29 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 32 | View Replies]

To: Eric in the Ozarks

You must not have California oxygentated gas in your truck.

V6?


38 posted on 03/16/2005 11:14:57 AM PST by BurbankKarl
[ Post Reply | Private Reply | To 37 | View Replies]

To: BurbankKarl

Ugly!!


39 posted on 03/16/2005 11:15:29 AM PST by TXBSAFH (Never underestimate the power of human stupidity--Robert Heinlein)
[ Post Reply | Private Reply | To 32 | View Replies]

To: spectre

Get a Chrysler 300....


40 posted on 03/16/2005 11:17:07 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 36 | View Replies]

To: spectre

That is the same effect I got when I sat in some of the first Pontiac Firebirds and Chevy Camaros way back when the cars cost $2000 and up-engine models cost $3000. The entire interior was plastic and coming unglued already.


41 posted on 03/16/2005 11:17:48 AM PST by RightWhale (Please correct if cosmic balance requires.)
[ Post Reply | Private Reply | To 36 | View Replies]

To: Eric in the Ozarks

Long ago, my girlfriend at the time got a 128..when they first started coming over her..Cute car.. FWD, boxy, peppy...she liked it..Back then I enjoyed working on cars..oil changes, tune up..before everything was electronic circuits and computer chips. On this Italian POS, in order to change the spark plugs, you had to disengage the motor mounts and jack the block up three inches..


42 posted on 03/16/2005 11:19:54 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 33 | View Replies]

To: BurbankKarl

DAMN!!!! Give those union boys another raise!


43 posted on 03/16/2005 11:20:41 AM PST by Jaysun (If you eat mayonnaise on your hot dogs please don't talk to me.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: BurbankKarl

No. I run straight 87 gas and the motor is the 325 cu. inch V-8. Its a 2001 and I have 55,000 miles on it with no failures of any kind. I run semi synthetic oil, but that's the only special thing I do.


44 posted on 03/16/2005 11:20:55 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 38 | View Replies]

To: Southack
. . . you got *all* of the above wrong. You just batted zero.

LOL. That's what one gets for using the plight of GM as a sample-set.

45 posted on 03/16/2005 11:22:52 AM PST by 1rudeboy
[ Post Reply | Private Reply | To 27 | View Replies]

To: Southack
In contrast, you got *all* of the above wrong. You just batted zero.

No. Government employment is up, and they are doing well enough to offset the losses in other sectors.

Bush cut some taxes, others went up. Other increases in federal, state and local taxes more than offset the child tax credit which is the only tax cut most families have seen. The overall tax burden is higher each year because government spending keeps increasing regardless of which party is in power.

46 posted on 03/16/2005 11:27:35 AM PST by meadsjn
[ Post Reply | Private Reply | To 27 | View Replies]

To: ken5050

The 128 was a cute car. A few years in the winter salted roads of Iowa and Minnesota and you could see clear through them.


47 posted on 03/16/2005 11:31:01 AM PST by Eric in the Ozarks
[ Post Reply | Private Reply | To 42 | View Replies]

To: RightWhale

The auto industry is a major leader of the national economy. When autos sag, the economy slows. Which one is the cause and which the effect is not clear, it is somewhat symbiotic. Autos weaken, economy slows, other sectors, including housing follow. The question is how long and how deep the effects.

Actually TOTAL US car sales are up..including import brands.
Why are Toyota, BMW, and M/B expanding their US plants if auto sales are bad?


48 posted on 03/16/2005 11:31:12 AM PST by kaktuskid
[ Post Reply | Private Reply | To 28 | View Replies]

To: Eric in the Ozarks

I had a 124 Spyder...bought it used..the second car I ever owned..didn't need brakes..like the Flintstones..the body pan was so rusted out..I just stuck my feet down..and the top, ARRRRRGGGGHHH!


49 posted on 03/16/2005 11:34:11 AM PST by ken5050 (The Dem party is as dead as the NHL)
[ Post Reply | Private Reply | To 47 | View Replies]

To: RightWhale

You know, all those GM retirees pensions are held in GM stock.


50 posted on 03/16/2005 11:36:28 AM PST by BurbankKarl
[ Post Reply | Private Reply | To 35 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-98 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson