From Bloomberg News
General Motors Corp., the world's largest automaker, reported a sixth straight quarterly loss that beat analysts' estimates, helped by a smaller loss in its North American auto operations and a profit in Europe.
The first-quarter net loss narrowed to $323 million, or 57 cents a share, from $1.25 billion, or $2.22, a year earlier, the Detroit-based company said today in a statement. Excluding costs, GM reported per-share profit of 26 cents, compared with an average estimate of a loss of 44 cents in a Thomson Financial analyst survey. Revenue rose 14 percent to $52.2 billion.
The results were ``a good sign in the turnaround, and what we see in the first quarter we hope to continue as the year goes on,'' Chief Executive Officer Rick Wagoner said in an interview.
GM has scaled back as Asian rivals such as Toyota Motor Corp. and Honda Motor Co. win more sales, cutting the U.S. automaker's share of its home market to 26.2 percent last year, the lowest since 1925. Wagoner is reducing pension and health- care benefits, trimming 30,000 jobs in North America and closing nine plants, as well as selling assets such as 51 percent of GM's finance unit to raise money to help fund new models.
``These numbers, they're OK,'' Brian Reynolds, chief market strategist at MS Howells & Co. in Dunstable, Massachusetts, said. ``They're a little better than expected. It's like a drop in the ocean.''
Shares, Bonds Rise
The automaker's shares rose 71 cents, or 3.5 percent, to $21.28 at 8:48 a.m. in trading before the New York Stock Exchange opens. The shares fell 1 cent to $20.57 yesterday in NYSE composite trading and had gained 5.9 percent this year.
GM's 8.375 percent note due in 2033, today's most widely tradebond, rose 0.75 cent to 73.5 cents on the dollar, according to Trace, the price-reporting service of the NASD. The yield fell to 11.6 percent from 11.7 percent.
GM reported an adjusted loss of 94 cents a share, including a cost of $681 million, of $1.20 a share, to establish a retiree health-care fund. The 26 cents-a-share profit excludes that cost as well as other items including a gain of $317 million from selling most of its stake in Suzuki Motor Corp.
The retirement fund requires GM to set aside $1 billion annually in 2006, 2007 and 2011 to offset increased health-care costs to retired workers, according to a U.S. regulatory filing on March 31. It is part of an agreement to get a pretax health- care savings of about $3 billion a year from union workers.
GM is still discussing with the U.S. Securities and Exchange Commission whether to account for the full $3 billion this year or over the years of the contributions, Chief Financial Officer Fritz Henderson told reporters in Detroit.
North America, Europe
The automaker said its net loss for North American auto operations narrowed to $987 million from $1.74 billion a year earlier. In Europe, GM said it had net income of $48 million, compared with a net loss a year earlier of $514 million.
The automaker hasn't had a profit since the third quarter of 2004 and lost $10.6 billion last year. GM's U.S. sales of cars and light trucks fell 5.2 percent in the first quarter after a decline of 4.3 percent for all of last year.
Himanshu Patel, a JP Morgan Securities analyst ranked by StarMine Corp. as among the most accurate on GM, had estimated that the first-quarter loss would be 48 cents a share. He declined to comment about his forecast. The Thomson Financial survey doesn't disclose details of what the estimates include.
Cutting Costs
Wagoner said in January he would reduce pension and health-care benefits as part of plans to save about $8 billion a year.
In March, GM offered buyouts of as much as $140,000 to a third of its U.S. factory employees and reached an agreement with Delphi, its largest auto-parts supplier, on ways to persuade workers to retire. Delphi, which is in bankruptcy, wants to cut wages and benefits of union employees. The United Auto Workers has threatened to strike if Delphi is able to void their current contract, which could cripple GM's production.
Wagoner is trying to win back U.S. customers with redesigned models of cars and trucks such as the Chevrolet Tahoe sport-utility vehicle and Chevrolet Impala sedan. Last month, GM increased its production goal by a total of 12,000 this year for redesigned large SUVs such as the Tahoe and Escalade because of strong demand.
Those products may not be enough, said Pete Hastings, a Morgan Keegan & Co. fixed-income analyst in Memphis, Tennessee.
``There's just a real lack of excitement about GM's design,'' Hastings said. ``If they are going to return to profitability, they need to become more competitive on the auto front and not just with big trucks and SUVs. The Asian car companies are simply doing a better job of producing better- looking cars that are more desirable for buyers.''
Credit Ratings
GM also must contend with credit ratings that were lowered last year for the first time to high-risk, high-yield junk by Moody's Investors Service, Fitch Ratings and Standard & Poor's.
Those ratings were one reason that GM earlier this month agreed to sell 51 percent of the General Motors Acceptance Corp. finance unit to a group led by Cerberus Capital Management LP. GM has said it expects to receive about $14 billion in that transaction, including about $10 billion this year.
The deal, scheduled to be completed in the fourth quarter, is intended to help restore GMAC to investment grade by separating it from the parent company's rating.
GM also said on April 11 that it would sell a 7.9 percent stake in Isuzu Motors Ltd. for $300 million. In October, GM raised $600 million by selling a stake in Fuji Heavy Industries Ltd. and in March, the Detroit-based automaker sold most of its holdings in Suzuki for $2 billion.