[Also see: U.S. 'Birthrate' For New Factories Is Steadily Falling - Wall Street Journal 15mar2006]
DETROIT General Motors Corp.<GM.N> revised its reported loss for 2005 by a further $2 billion on Thursday, citing charges related to factory job losses, its finance arm GMAC. and the bankruptcy of its former subsidiary Delphi Corp.
GM also said it would delay filing its annual report with securities regulators because it had mistakenly accounted for cash flows from a mortgage subsidiary of GMAC called ResCap.
The massive $10.6 billion loss for 2005 on a revised basis represented almost 85 percent of the current market value of the top U.S. automaker as of the close of trade on Thursday.
On a per-share basis the newly reported loss of $18.69 was also just shy of GM's closing price at end December after a year-long slide that cut the stock's value by more than half.
Because of the delay in filing GM's revised annual report, it was impossible to know how the increased charges would affect the $16.8 billion in cash GM's auto operations held at end December.
Shares in GM closed Thursday at $22.22 and have gained almost 16 percent this month on signs that the company was making progress in its turnaround efforts.
One analyst said it was encouraging that GM had raised its estimate of the cost to resolve problems at Delphi since that could suggest a resolution that would avoid a crippling strike.
GM said its mortgage-related accounting problem would not change reported net income, but could change its statement of cash flows at ResCap, GMAC and the parent company.
Once it resolved the accounting issue, GM said it would file its annual report with the U.S. Securities and Exchange Commission within the next two weeks.
MORE COSTS FOR JOB LOSSES
Among the revisions, GM said it was taking a $1.7 billion charge as it shuts factories and lays off workers, up from an initial $1.4 billion for that sweeping restructuring.
The Detroit-based company, which remains the world's No. 1 automaker by revenue but ranks No. 8 by market value, has been slashing costs and cutting capacity as it adjusts to the loss of market share to Asian rivals in its core U.S. market.
The increased charge added $300 million in costs that GM said it expected to incur once its current contract with the United Autos Workers union expires in September 2007.
Under the current union contract, idled factory workers are able to collect salary and benefits in a costly program known as the JOBS bank. GM has not disclosed the number of workers in that program, but union and analyst estimates put the total at over 7,000.
GM said it was in talks with the UAW to reduce that number through a cost-saving program of buyouts and early retirement.
GM also said it was increasing the estimate of its exposure to former subsidiary Delphi Corp. <DPHIQ.PK> from $5.5 billion before taxes from an earlier estimate of $3.6 billion.
It said that its total exposure could be as high as $12 billion, but would probably be much lower if a three-way deal including Delphi and the UAW could be clinched.
The three parties are in talks aimed at avoiding a costly labor disruption through some kind of buyout program to encourage early retirements and payouts that would be funded by GM.
Absent such a deal, Delphi Chief Executive Steve Miller has said he would ask a federal bankruptcy judge to void the supplier's existing labor contracts, setting the stage for a strike that could cripple GM.
J.P. Morgan analyst Himanshu Patel said in a note last month that a work stoppage at Delphi could cause GM's U.S. operations to grind to a halt and cost it some $5 billion in cash a month.
For that reason, GM's recognition of a higher cost for Delphi could actually be read as a positive development, said Erich Merkle, of auto tracking firm IRN Inc.
"This sounds good," Merkle said. "We've felt all along that GM would have to provide some kind of early retirement or other buyouts. Obviously, they're raising cash for something."
When GM spun off Delphi in 1999 it guaranteed the pensions and benefits of the union workers.
GM spokeswoman Toni Simonetti said the revised estimate included more than just guaranteed benefits. "It's the benefit guarantees plus other exposures," she said.
GM said in its statement that a further revision to its estimate of Delphi-related expenses was possible before it filed its annual report.
source: http://today.reuters.com/investing/financeArticle.aspx?type=governmentFilingsNews&storyID=2006-03-17T022757Z_01_N16147191_RTRIDST_0_AUTOS-GM-UPDATE-2.XML 16mar2006
DETROIT General Motors Corp. Thursday said it is increasing by $2 billion the loss it previously reported for 2005 and intends to restate earnings from 2000 through the first quarter of 2005 as a result of a variety of recently discovered accounting errors.
GM, which is already facing an inquiry into its accounting practices by the Securities and Exchange Commission, also said it would delay its filing of a 10-K report that outlines final 2005 earnings figures. The company said it intends to file its 10-K "as soon as practicable" within two weeks. It said the delay was the result of "an accounting issue" regarding the classification of cash flows at ResCap, the residential mortgage business of its financing arm, General Motors Acceptance Corp.
The news is the latest blow for the embattled auto giant and its chairman and chief executive, Rick Wagoner. The disclosure that GM materially overstated income over several years will likely add to pressure on Mr. Wagoner, who has been struggling to stem losses and declining market share as well as increasing impatience of at least a few large shareholders. GM's largest shareholder, billionaire Kirk Kerkorian, recently had a close lieutenant, Jerome York, take a seat on GM's board of directors.
Mr. York has urged GM management to accelerate their restructuring of the company and to move more quickly to streamline operations.
In a statement released late on Thursday, GM said it is increasing its 2005 loss to $10.6 billion or $18.69 per share, from the previously reported preliminary total of $8.6 billion or $15.13 per share. The increased loss stems from an increase by $400 million in the restructuring charges GM is taking in 2005 for its North American operations; an increase of $1.3 billion in the money GM is setting aside to cover the cost of potential liabilities related to the bankruptcy filing of its former parts division, Delphi Corp.; and a non-cash, after-tax charge of $439 million related primarily to GMAC's commercial finance business.
"The revised Delphi charge is based on the facts and circumstances as they exist today," the company said in its statement. "Any new development in the Delphi discussions prior to GM's filing of the 2005 10-K could result in a further update to these estimates."
GM and Delphi are currently negotiating with the United Auto Workers on possible buyouts for thousands of former GM workers who moved when the parts unit was spun off as a separate company in 1999. GM is liable for an undetermined amount of pension and health-care obligations for these workers.
GM said yesterday in its statement that its liability at anywhere between $5.5 billion and $12 billion. (See related article.)
Toni Simonetti, a GM spokeswoman, said the adjustment of the range of potential Delphi liabilities was a result of recent talks with the UAW. "That does not mean that we have a resolution to announce, but it reflects our better estimate of what our contingent exposure would be," she said.
GM also said it must restate earnings figures for 2000 through 2004 as a result of "erroneously" booking payments and credits it received from suppliers a key issue the SEC has been examining.
Among the errors GM outlined in its statement was a $55 million credit from Delphi in 2001 that GM erroneously recorded as a reduction in stockholders' equity. It will now be recorded as a warranty expense in that period. Other errors involved anticipated reductions in health-care costs that were incorrectly calculated in 2002, and erroneously state expenses related to retiree benefits in 2002, 2003 and 2004.
As a result of the adjustments, net income will be $20 million lower for 2000; $78 million higher in 2001; $81 million lower in 2002; $64 million higher in 2003; and $10 million higher in 2005.
Additionally, GM said it must lower by $149 million the net income figure it previously reported for the first quarter of 2005. The change is primarily the result of accounting errors that inflated the value of cars GM was leasing to rental companies.
"The restatements and changes in some of the financial information were the result of a fairly thorough review that GM has been doing," Ms. Simonetti said. "I would say it probably begun with the review of the supplier credit issue. As we were conducting that review, whenever we determined we had an issue, we basically decided to correct it and disclose it."
Argus Research analyst Kevin Tynan said the increased charges and accounting restatements will reinforce the generally negative view on GM's stock. "The accounting issues are certainly yellow flags, if not red flags," he said. "But it's a stock and an industry that's so battered, it's not like you're talking about a company in the top echelon of financial strength. It probably just reinforces people's concerns that this is an industry and company to avoid," he said.
In November, GM said it must restate financial results for 2001 and possibly subsequent years and acknowledged it overstated income for 2001 by as much as $300 million to $400 million equivalent to about 50% of the profit it reported at the time.
Mr. Wagoner, who was CEO in 2001, has spent his five years at the company's helm trying to expand its global footprint while propping up North American sales to generate revenue to cover burgeoning U.S. health-care and pension costs. But intensified competition coupled with rising gas prices, which have dented demand for GM's most profitable models, have undermined Mr. Wagoner's strategy for keeping GM in the black.
The company's falling stock price and the downgrading of its debt last year to junk status by all the major credit-rating agencies symbolize the declining confidence in Mr. Wagoner, who became GM's chief financial officer in 1992 in a boardroom coup that swept out top management.
Neither GM nor Mr. Wagoner or any GM officer has been accused by the SEC of any wrongdoing.
The issue of how to book rebates and other credits from suppliers is a thorny one that has tripped up other companies, ranging from supermarket chain Royal Ahold NV to Kmart Corp. Accepting or demanding credits from suppliers is common practice in many industries. But under accounting rules, if those credits are essentially rebates related to larger orders from suppliers, they are supposed to be booked into profits over time, not immediately.
The practice of suppliers making payments to customers, effectively rebating projected cost savings up front, has been especially touchy in the auto industry.
GM's announcement came about a week after Credit Suisse First Boston analyst Christopher Ceraso said he feared that GM could be late in making the filing because of pending SEC inquiries, mainly since auto supplier Lear Corp. had said it was subpoenaed the SEC in February as part of the SEC's investigation of GM.
"Considering that Lear just received the subpoena in February and that, as the Wednesday announcement from Lear suggests, there could be disputes that result from the pricing investigation, one might conclude that the SEC investigation may take longer than GM anticipates, possibly jeopardizing the timely filing of its 2005 10K," Mr. Ceraso said.
When Mr. Ceraso raised the concern, GM executives adamantly disputed his report, saying the filing was on schedule. And early in the day on Thursday, GM executives were saying the filing would likely be made later in the day.
Mr. Ceraso "cited entirely different reasons for a delay in the filings," Ms. Simonetti said. "We were prepared to make our filings and we had a lot of information to report." But the ResCap issue prevented a filing, she said, calling it "a fairly recent discovery."
Jeffrey C. McCracken and Terry Kosdrosky contributed to this story
General Motors Corp. increased its 2005 loss by $2 billion and restated earnings for the four previous years on accounting errors after delaying an annual filing to U.S. regulators because of financial reporting problems at a mortgage unit.
The loss will be $10.6 billion rather than the $8.6 billion reported in January, GM, the world's largest automaker, said in a statement today. The increase stems from rising costs for job cuts and for aiding bankrupt auto-parts supplier and former subsidiary Delphi Corp.
``These disclosures don't look very good when investors are already skittish about what's going on in the automotive industry,'' John Casesa, an industry consultant and Managing Partner of New York-based Casesa Strategic Advisors LLC, said in an interview. ``You hate to discover a leak in your basement when you're trying to sell your house.''
The restatements and delayed report come as Chief Executive Officer Rick Wagoner is seeking to restore investor confidence after GM shares fell 52 percent in 2005, the most of any company in the Dow Jones Industrial Average. Wagoner has said he's trying to resolve issues related to a U.S. Securities and Exchange Commission investigation and to worker costs for the bankruptcy of Delphi while focusing on selling more cars and trucks.
GM blamed the restatements through 2004 on issues ranging from the accounting of sales of precious metals to transactions with auto-parts suppliers.
The company also said it expects to file the 10-K annual report within two weeks. As recently as March 10, Detroit-based GM said it would meet today's U.S. filing deadline.
Mortgage Errors
GM said it is delaying the filing because of errors in classification of cash flows for mortgage loan transactions at Residential Capital Corp., a home mortgage subsidiary of GM's General Motors Acceptance Corp. finance unit. GM hasn't completed the review of the cash flow classification. The restatements may effect cash flow for 2005 and prior periods at GM, GMAC and the ResCap unit.
GM said it expects to report costs of $3.6 billion for 2005 to help Delphi, its former parts unit. Its earlier estimate was $2.3 billion. The automaker also said it will have costs of $1.7 billion, rather than $1.3 billion, for planned job cuts in North America. GM will write down the value of its GMAC Commercial Finance operations by $439 million.
On a pretax basis, the automaker said its estimated cost for helping Delphi is now $5.5 billion to $12 billion, with the amount likely to be closer to the low end. GM said on Jan. 26 it expected those costs to range from $3.6 billion to $12 billion, and probably be closer to the low end. In October, GM had said the range would be zero to $12 billion, with the probable amount near the midpoint.
Delphi's Bankruptcy
Delphi, of Troy, Michigan, in October filed for bankruptcy protection for its U.S. operations after failing to get concessions from unions and financial aid from GM. The United Auto Workers union said yesterday that it's not close to an agreement with GM and Delphi that would reduce the parts company's labor costs and avoid a strike.
GM shares fell as much as 7 cents to $22.15 at 7:49 p.m. in trading after the New York Stock Exchange closed before recovering to $22.23 at 8:05 p.m. They had risen 72 cents, or 3.4 percent, to $22.22 in regular composite trading, before the restatements were announced.
The stock has gained 14 percent this year, in part on optimism that the automaker will improve from $8.55 billion in 2005 losses.
Bonds
The company's GMAC 8 percent bonds that mature in 2031 rose 1.3 cents on the dollar to 95.4 cents on the dollar today at 3:43 p.m., according to Trace, the bond reporting service of the NASD. The yield fell to 8.44 percent from 8.57 percent.
The automaker in October also said it received subpoenas from the SEC on issues including financial reporting of pension and other retiree-benefit programs, transactions between the automaker and Delphi, recovery of recall costs from suppliers, and GM's possible obligation to fund Delphi's pensions.
Lear Corp., the world's largest maker of automotive interiors, said in a filing last week that it received a subpoena in February seeking documents relating to payments or credits by Southfield, Michigan-based Lear to GM starting in 2001. GM today said it will make several restatements relating to suppliers, stockholders' equity and a plant contract.
Parts Transactions
The automaker said it erroneously reported cost of sales on certain payments and credits received from suppliers prior to the completion of the earnings process. The impact will reduce the company's pretax income from 2000 to 2002 and in 2004. The company's pretax income will increase in 2003. After the restatement, a deferred pretax credit of about $548 million would exist as of Dec. 31, 2004. It will be recognized as a reduction of cost of sales in future periods.
In 2001, GM said it incorrectly reported a $55 million pretax settlement with Delphi as a credit to be used against amounts owed by Delphi to GM. Delphi was spun off from GM in 1999. The item will now be reported as a warranty expenses for the period.
An $18 million pretax expense related to a contract involving Delphi's Flint, Michigan, plant in 2001 will be recorded as an expense in 2000.
GM said it incorrectly reported a $27 million pretax gain on disposal of precious metal inventory that has now been recorded as a financing transaction because GM had an obligation to repurchase the inventory in 2001.
The automaker said it erroneously calculated the effect of cost-reduction initiatives on its expected health-care costs for 2002 and understated the rate. GM's post-retirement employee benefit and pretax expenses was overstated by $9 million in 2004 and understated by $51 million in 2003 and $30 million in 2002.
source: http://quote.bloomberg.com/apps/news?pid=10000103&sid=aljY1GAp9e9g&refer=news_index 16mar2006
DETROIT General Motors Corp. (NYSE: GM) today provided updated preliminary financial results for 2005 and said it will delay filing its annual report on Form 10-K with the Securities and Exchange Commission due to an accounting issue regarding the classification of cash flows at ResCap, the residential mortgage subsidiary of GMAC.
The ResCap accounting issue relates to the erroneous classification of cash flows from certain mortgage loan transactions as cash flows from operations instead of cash flows from investing activities. Although the company has not completed its review of this matter, the issue will not impact either net income or the balance sheet presentation but is expected to impact the presentation of cash flows from operating and investing activities. This issue may impact the statements of cash flows for 2005 and prior periods at ResCap, GMAC and GM, and the impact may be material in some or all of the affected periods.
With the exception of the ResCap accounting issue, GM is otherwise prepared to file its 2005 Form 10-K and intends to do so as soon as practicable and within the next two weeks. At that time, GM also intends to report restated results for the years ended Dec. 31, 2000 to Dec. 31, 2004 on Form 10-K/A.
When GM files its 10-K, will provide final financial results for 2005 that differ from the preliminary results reported in January principally due to adjustments for three charges. These charges will increase GM's reported loss in 2005 to a total of $10.6 billion, or $18.69 per share, including special items. This compares to the previously reported loss of $8.6 billion, or $15.13 per share.
The final 2005 results will include an increase in the previously announced North American restructuring charge; an increase to the contingent liabilities associated with Delphi Corp.'s Chapter 11 filing; and recognition at the GM level of the previously reported non-cash goodwill impairment charge of $439 million (after tax) at GMAC.
Revision to North American Restructuring Charge
GM expects to change the amount of its 2005 North American restructuring charge to $1.7 billion (after tax) from the previously reported charge of $1.3 billion (after tax) to reflect an increase in the provision for employee costs at facilities where GM plans to cease production. The previously reported charge included cash payments that would be made to affected employees during the current labor agreement, attributable to the JOBS bank provisions of that agreement. However, after further review, GM has determined to also include in the revised charge management's best estimate of the costs it expects to pay during periods after the current labor contract expires in September 2007. In this regard, GM is currently in discussions with the United Auto Workers union on an accelerated attrition program for active employees, by which GM would be able to reduce the number of employees in the JOBS bank in a cost effective manner. GM currently believes that any agreement on an attrition program would not likely change the amount of this charge.
Revision to Delphi Charge, GMAC Impairment
GM also expects to increase the charge for GM's contingent exposure relating to Delphi's Chapter 11 filing, including benefit guarantees between GM and certain unions, to $3.6 billion ($5.5 billion before tax) from the previous estimate of $2.3 billion ($3.6 billion before tax). GM's current estimate of the pre-tax range of this contingent exposure is now between $5.5 billion and $12 billion, with amounts near the low end of the range considered more possible than amounts near the high end of the range, assuming an agreement is reached among GM, Delphi and Delphi's unions. This is consistent with the company's previously issued guidance on the range of the contingent exposure to GM and it reflects developments in the discussions with Delphi and the UAW on a comprehensive agreement. The revised Delphi charge is based on the facts and circumstances as they exist today. Any new development in the Delphi discussions prior to GM's filing of the 2005 10-K could result in a further update to these estimates.
In addition, GM intends to recognize non-cash goodwill impairment charges of $439 million (after-tax) in the fourth quarter of 2005. These charges relate primarily to GMAC's Commercial Finance operating segment. Previously, GM reported but did not recognize these goodwill charges in its 2005 consolidated financial statements because the goodwill was deemed recoverable by GM at the GMAC reporting unit level.
However, after further internal review of applicable accounting standards, and in consultation with the company's outside auditors, GM has determined that it should recognize the previously disclosed GMAC impairment in GM's consolidated results for 2005.
Other SEC Filings
GM's Form 10-K/A is currently expected to reflect restatements relating to supplier credits and other matters. GM had previously disclosed in November 2005 that it would restate its financial statements for 2001 and subsequent periods to correct the accounting for supplier credits.
Among the items that GM expects to restate in its Form 10-K/A are the following:
GM erroneously recorded as a reduction to cost of sales certain payments and credits received from suppliers prior to the completion of the earnings process. GM has concluded that the payments and credits received were associated with agreements for the award of future services or products or other rights and privileges and should be recognized when subsequently earned.
The effect of these errors was a reduction in pre-tax income of $26 million for 2004; an increase in pre-tax income of $7 million in 2003; a reduction in pre-tax income of $69 million in 2002; a reduction in pre-tax income of $405 million in 2001; and a reduction in pre-tax income of $52 million in 2000. After restatement, a deferred credit of approximately $548 million (pre tax) would exist as of Dec. 31, 2004, which will be recognized as a reduction of cost of sales in future periods.
In 2001, GM erroneously recorded, as a reduction in stockholders' equity, a $55 million pre-tax settlement with Delphi in the form of a credit to be used against amounts owed by Delphi to GM in relation to pension, Other Post Employment Benefits (OPEB), and other employment related benefits of former GM employees who had transferred to Delphi. This item will now be recorded as a warranty expense in that period.
In 2001, GM erroneously recorded $18 million of pre-tax expense related to a contract involving Delphi's Flint East, Mich., plant that has now been recorded as an expense in 2000.
GM erroneously calculated the anticipated effect of cost reduction initiatives on its expected healthcare cost trend rate for 2002 and, as a result, understated that rate. Accordingly, GM's other postretirement employee benefit (OPEB) pre-tax expense was overstated by $9 million in 2004 and understated by $51 million in 2003 and $30 million in 2002.
In 2000, GM erroneously recognized a $27 million pre-tax gain on disposal of precious metals inventory that has now been recorded as a financing transaction because GM had an obligation to repurchase the inventory in 2001.
For all periods, GM intends to record all other accounting adjustments it has identified that were not recorded in the proper period. The net effect of these other adjustments, net-of-tax, is currently expected to be an increase in net income of $10 million in 2004, an increase in net income of $64 million in 2003, a reduction in net income of $81 million in 2002, an increase in net income of $78 million in 2001, and a reduction in net income of $20 million in 2000.
GM has also determined that investors should not continue to rely on its previously filed financial statements for the first quarter of 2005 due to accounting errors resulting in an unfavorable impact on net income of $149 million, of which $107 million relates to accounting for vehicles on operating leases with daily rental car companies. GM's portfolio of vehicles on operating lease with daily rental car companies, which was impaired at lease inception, was prematurely revalued in 2005 to reflect increased anticipated proceeds upon disposal.
Forward-looking Statements
In this press release and in related comments by General Motors' and General Motors Acceptance Corporation's management, the use of the words "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "seek," "may," "would," "could," "should," "believe," "potential," "continue," "designed," "impact," or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements in this press release and in related comments, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties.
While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results, and GM's actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K. Such factors include, among others, the following: the resolution of accounting issues relating to ResCap cash flows, the ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring, to achieve reductions in health care and pension costs and to implement capital expenditures at levels and times planned by management; the amount and rate of employee attrition; the pace of product introductions; market acceptance of the corporation's new products; significant changes in the competitive environment and the effect of competition in the corporation's markets, including on the corporation's pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; restrictions on GMAC's and Residential Capital Corporation (ResCap)'s ability to pay dividends and prepay subordinated debt obligations to us; changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; costs and risks associated with litigation; the final results of investigations by the SEC; costs and risks associated with litigation; the final results of investigations and inquiries by the SEC; changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could result in an impact on earnings; changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees; negotiations and bankruptcy court actions with respect to Delphi Corp.'s obligations to GM, negotiations with respect to GM's obligations under the pension benefit guarantees to Delphi employees, and GM's ability to recover any indemnity claims against Delphi; labor strikes or work stoppages at GM or its key suppliers such as Delphi or financial difficulties at GM's key suppliers such as Delphi; additional credit rating downgrades; the effect of a potential sale or other extraordinary transaction involving GMAC on the results of GM's and GMAC's operations and liquidity; other factors impacting financing and insurance operating segments' results of operations and financial condition such as credit ratings, adequate access to the market, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate, and changes in our contractual servicing rights; shortages of and price increases for fuel; and changes in economic conditions, commodity prices, currency exchange rates or political stability in the markets in which we operate.
In addition, GMAC's actual results may differ materially due to numerous important factors that are described in GMAC's most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K. Such factors include, among others, the following: the ability of GM, to complete a transaction with a strategic investor regarding a controlling interest in GMAC while maintaining a significant stake in GMAC, securing separate credit ratings and low cost funding to sustain growth for GMAC and ResCap and maintaining the mutually beneficial relationship between GMAC and GM; significant changes in the competitive environment and the effect of competition in the corporation's markets, including on the corporation's pricing policies; our ability to maintain adequate financing sources; our ability to maintain an appropriate level of debt; the profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM's contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi Corp.; funding obligations under GM and its subsidiaries' qualified U.S. defined benefits pension plans; restrictions on ResCap's ability to pay dividends and prepay subordinated debt obligations to us; changes in the residual value of off-lease vehicles; changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate; changes in our contractual servicing rights; costs and risks associated with litigation; changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; changes in the credit ratings of GMAC or GM; the threat of natural calamities; changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations.
Investors are cautioned not to place undue reliance on forward-looking statements. GM undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.
Use of the term "loans" describes products associated with direct and indirect lending activities of GMAC's global operations. The specific products include retail installment sales contracts, loans, lines of credit, leases or other financing products. The term "originate" refers to GMAC's purchase, acquisition or direct origination of various "loan" products.
source: http://www.newswire.ca/en/releases/archive/March2006/16/c3251.html 16mar2006
DETROIT General Motors Corp. revised its loss for 2005 to $10.6 billion $2 billion more than it reported in January citing higher costs it anticipates for its broad restructuring and the bankruptcy reorganization of Delphi Corp.
GM also said late Thursday it will recognize a previously reported goodwill impairment charge of $439 million at its finance arm, General Motors Acceptance Corp.
GM, the world's largest auto maker, said it expects to increase the charge for its exposure relating to Delphi's Chapter 11 filing to $3.6 billion from the previous estimate of $2.3 billion.
Additionally, GM will boost its North American restructuring charge to $1.7 billion from the previously reported $1.3 billion to cover higher expected costs for plants the company aims to close.
The previous charge included cash payments that would be made to affected employees during the current labor agreement, while the revised charge considers GM's estimate of costs it expects to pay after the contract expires in September 2007.
The change "reflects developments in the discussions with Delphi" and the United Auto Workers union on a comprehensive agreement, the company said in a statement.
"The revised Delphi charge is based on the facts and circumstances as they exist today," the company said.
GM spokesman Jerry Dubrowski said the company increased the charge by $1.3 billion after it "refined the range" of its potential liability for Delphi workers' compensation.
"We've got better information" than was available when Delphi filed for bankruptcy Oct. 8, he said.
The goodwill impairment charge relates mainly to GMAC's commercial finance operating segment. Previously, GM reported but did not recognize these charges in its 2005 financial statements because the goodwill was deemed recoverable. GM decided to recognize the $439 million charge for the fourth quarter of 2005 after an internal review of accounting standards and consultation with its outside auditors.
The changes involve bookkeeping, not GM's embattled manufacturing operations. "These are accounting issues," Dubrowski said.
The 2005 loss translates to $18.69 a share. Previously, the world's largest automaker said it lost $8.6 billion, or $15.13 a share, last year.
GM sold 9.2 million vehicles worldwide in 2005, the second-largest volume in the company's history. North American losses wiped out sales gains in Europe, Asia, Latin America, Africa and the Middle East; GM's worldwide market share slipped to 14.2 percent from 14.4 percent in 2004.
The automaker's U.S. sales increased 1 percent in the first two months of this year, although GM earlier Thursday announced a cash incentive program for vehicles that have gone unsold for as long as four months.
Detroit-based GM is attempting to negotiate a revised labor agreement with Delphi and the UAW to help Delphi's hourly workers. The Troy-based supplier, which GM spun off in 1999, has asked the UAW and other unions to agree to pay cuts of more than 60 percent for its 34,000 unionized hourly workers. The unions have refused.
GM has stepped into the fray because it relies heavily on Delphi for parts and says it could be contractually liable for up to $12 billion in benefits promised to Delphi workers.
Delphi is threatening to ask a bankruptcy court judge to cancel its labor contracts on March 31 if it hasn't reached a deal to cut its labor costs. If the judge cancels Delphi's contracts, the UAW has said it will strike.
Another Delphi union, the International Union of Electronic Workers-Communications Workers of America, already has voted to authorize a strike.
GM said it will delay filing its 2005 annual report, but still expects to do so this month.
GM shares gained 3.4 percent, or 72 cents, to close at $22.22 Thursday on the New York Stock Exchange, before it released news of the restatement.
source: http://www.latimes.com/business/investing/wire/sns-ap-gm-accounting,1,5286005,print.story?coll=sns-ap-investing-headlines&ctrack=1&cset=true 16mar2006
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