Times are tough for General Motors Corp., and the mortgage mess isn't helping.
The world's biggest carmaker on Tuesday reported a $38.7-billion loss in 2007, a record for any auto manufacturer, after a poor fourth quarter that was made weaker by sliding U.S. sales and exposure to risky mortgage investments.
The massive loss was largely attributable to a third-quarter write-down of tax credits amounting to $39 billion. Excluding the write-down and other one-time charges, GM said it lost $23 million on the year.
The company has not had a full year in the black since 2004. As part of its quest to return to profitability, GM on Tuesday announced a new round of buyouts aimed at reducing costs.
In 2007, the Detroit giant managed to maintain -- by a thread -- its title as the world's largest seller of automobiles, but saw its sales in the U.S. slip by 5.9%. For the fourth quarter, GM posted a net loss of $722 million, or $1.28 a share, compared with net income of $950 million, or $1.68 a share, a year earlier.
The decline in domestic sales, combined with huge mortgage-related losses from GM's large stake in lender GMAC, overshadowed some good news: increasing international sales and overall rising revenue. Fourth-quarter revenue was $46.7 billion, up 7% compared with the same period in 2006. Revenue for the year was $178 billion, up $7 billion, or 4%, from 2006.
"We're pleased with the positive improvement trend in our automotive results, especially given the challenging conditions," GM Chairman and Chief Executive Rick Wagoner said. "But we have more work to do to achieve acceptable profitability and positive cash flow."
Of particular concern are North American operations, where GM lost $1.1 billion on the quarter, considerably above analysts' expectations of a $400-million shortfall.
"I was frankly taken aback by the size of that loss," said David Healy, an analyst at Burnham Securities, who says he expects sales to continue trending down for at least the first half of 2008 as consumers, cut off from lines of credit by declining home values and tighter lending standards, put off car purchases.
"People are afraid to buy cars or can't afford financing," Healy said. "GM will be losing the marginal customer because of the mortgage crisis." Those pressures were already evident in the U.S. market last year, when total sales for all makers declined 2.5% to 16.1 million cars and light trucks. This year, sales are expected to fall below 16 million.
