Even China ran in the red for GM in 2008.
General Motors Corp. sales collapsed not only in the U.S., but around the world during the fourth quarter, according to the company’s latest financial report, which included a $31 billion loss for 2008, and a $9.6 billion loss in the fourth quarter.
Chairman and CEO Rick Wagoner says it “was an extremely difficult year for the U.S. and global auto markets, especially the second half. These conditions created a very challenging environment for GM and other automakers, and led us to take further aggressive and difficult measures to restructure our business.”
Wagoner expects “these challenging conditions will continue through 2009, and so we are accelerating our restructuring actions. At the same time, we are continuing our commitment to exciting, fuel-efficient cars and trucks, and the leadership in advanced propulsion technology.”
GM is technically bankrupt without the $22.5 billion in additional funds requested from the U.S. Treasury. And even if it receives the additional money, the collapse of its international operations and unfunded pension obligations could still sink it.GM withheld its preliminary 2008 results from restructuring plan it made public last week. GM executives met with the Presidential Task Force on Autos today, presumably to discuss the latest bad news. It is not clear if the Treasury Department knew of the results before they were revealed this morning.
Particular worrisome was this: “As a result of year-end measurements of GM’s net pension obligations, it was determined that the U.S. hourly and salaried qualified pension plans are currently underfunded, on a combined basis, by approximately $12.4 billion.”
GM says that several factors contributed to the underfunded status, including service and interest costs; lower asset returns; lower discount rates; changes in actuarial assumptions; various hourly initiatives including the UAW special attrition program, VEBA agreement, Delphi pension transfer and IUE contract; and salaried initiatives including the pension benefit changes relating to the elimination of post-65 retiree healthcare and the salaried retirement program.
While GM plans no additional pension contributions are over the next three years, the funded status of the pension plan is subject to a number of variables. GM will continue to analyze its pension funding strategies going forward.
GM had adjusted automotive operating cash flow of negative $5.2 billion in the fourth quarter, and ended the 2008 calendar year with adjusted automotive operating cash flow of negative $19.2 billion, largely due to lower volume across GM’s global operations and negative working capital, according to the financial report released Thursday morning.
Cash, marketable securities and readily available assets, including the Voluntary Employees Beneficiary Association (VEBA) trust, which is independent of GM, totaled $14 billion as of Dec. 31, 2008, down from $27.3 billion on Dec. 31, 2007.
Offsetting the dire cash balances are the proceeds from the loans by the U.S. government. On Dec. 31, 2008, GM entered into a loan agreement with the U.S. Department of Treasury (UST) for funding of $13.4 billion, payable in three tranches. The initial installment of $4.0 billion was provided to GM on Dec. 31, 2008, followed by subsequent installments of $5.4 billion and $4.0 billion on Jan. 21, 2009 and Feb. 17, 2009, respectively.
Since GM pays bills 30 days to 45 days after they are submitted, GM was able to stay current on its financial obligations and thus far meet its payroll.
GM’s overall revenue dropped 35% in the fourth quarter. Revenue was down 31.3% in North America. It dropped 21% in Latin America, which heretofore was regarded as the Promised Land by GM’s top brass.
However, the company’s performance was in North American and Latin America was relatively good compared to the company’s difficulties in Europe and Asia.
GM Asia Pacific posted an adjusted loss before tax of $879 million for the fourth quarter, compared to adjusted income of $72 million in the year-ago GMAP fourth quarter earnings were hurt by lower industry volume, unfavorable pricing, unfavorable foreign exchange and commodity hedging, partially offset by favorable model and mix and continued favorable cost performance.
For the year, GMAP posted an adjusted loss before tax of $664 million, compared to reported net income of $681 million for 2007.
GM’s revenue also dropped by a stunning -40%, which helps explain why GM is suddenly talking about dumping Adam Opel AG. For the fourth quarter 2008, GM Europe posted an adjusted loss before tax of $956 million, versus an adjusted loss before tax of $215 million in the year-ago period. For 2008, GME posted a reported loss of $2.8 billion, compared to reported loss of $524 million.
In the fourth quarter 2008, GM posted an adjusted net loss of $5.9 billion or $9.65 per diluted share, compared to adjusted net income of $46 million, or 8 cents per diluted share in the year-ago period. Including special items, the company’s net loss reached $9.6 billion or $15.71 per diluted share in the fourth quarter 2008, compared to a net loss of $1.5 billion, or $2.70 per diluted share in the year-ago period.
The fourth quarter 2008 results reflect special items totaling $3.7 billion.
Overall, GM reported that its total revenue in 2008 was $149 billion, compared with $180 billion in 2007. GM’s core automotive business generated revenue of $148 billion in 2008, down from $178 billion in 2007. The revenue decline was predominantly due to the precipitous drop in sales amid record low consumer confidence in the U.S. and sharply lower sales across all of GM’s operating regions due to economic turmoil in the global markets. Global industry sales in 2008 were down 5 %, or 3.6 million vehicles, versus 2007 levels, and U.S. industry sales fell by 18 %, or nearly 3 million units.
For the 2008 calendar year, GM reported an adjusted net loss, excluding special items, of $16.8 billion, or $29 per diluted share. This compares to an adjusted net loss of $279 million, or 49 cents per diluted share in 2007. Including special items, GM said total losses were $30.9 billion, or $53.32 per diluted share, compared to a reported loss of $43.3 billion, or $76.52 per diluted share in 2007, which included a non-cash special charge of $38.3 billion in the third quarter related to the valuation allowance against deferred tax assets.
Finally, GM anticipates receiving a “going concern” opinion from its auditors in the 2008 10-K. This means GM and its auditors must determine whether there is substantial doubt about GM’s ability to continue as a going concern. GM’s Viability Plan filed with the U.S. Treasury on Feb. 17, 2009, included a request for additional funding from the U.S. Treasury, as well as support from other governments outside of the U.S. GM requires this funding in 2009 to continue operations until global automotive sales recover and its restructuring actions generate benefits, resulting in the company being able to fund its own operating requirements.