GM Reports Loss for 2007 and Fourth Quarter
February 12, 2008

Despite improvements in its overall global auto business, General Motors posted losses for 2007 and for the fourth quarter of 2007.

GM's financial results show the automaker is flourishing in emerging growth markets but is still struggling in its North American auto operations. It also has been hurt by the housing and subprime lending crisis in the U.S.

In an effort to cut costs in North America, GM announced Tuesday it had reached an agreement with the United Auto Workers union for an even more attractive buyout program for hourly workers than the last one offered in 2006.

Fourth Quarter: Headed in the Wrong Direction

GM went from a profit in the year-ago fourth quarter to a loss in the final quarter of 2007.

In the fourth quarter, GM posted a net loss of $722 million, compared with a profit of $950 million in the year-ago quarter. The loss came on the shoulders of GM's North American operations and GMAC, GM's captive finance company.

GM's North American automotive operation posted an adjusted loss before tax of $1.1 billion, compared with an adjusted loss before tax of $129 million million in the year-ago quarter.

GM also recorded a $394 million loss in the quarter from its 49 percent stake in GMAC, which has been clobbered by the housing and subprime loan crisis. GM sold 51 percent of GMAC to Cerberus Capital Management, which also owns 80 percent of Chrysler.

Excluding charges, GM said its fourth-quarter adjusted profit was $46 million, compared with an adjusted profit of $180 million in the year-ago period.

GM had a number of special items within its fourth-quarter results. They included tax benefits related to its sale of Allison Transmission, which were offset by costs related to GM's support of restructuring efforts by Delphi, the supplier composed of former GM parts operations that is emerging from Chapter 11 bankruptcy.

GM’s revenue in the fourth quarter totaled $47.1 billion, down from $50.8 billion in the year-ago period. The decline was due to the exclusion of GMAC revenue that started Dec. 1, 2006.

Revenue from automotive operations, however, set a new record, totaling $46.7 billion, up $3 billion over the prior year. The higher revenue was due to GM’s increases in Latin America, Asia Pacific and Eastern Europe.

2007 Results

For the full year of 2007, GM reported a loss of $38.7 billion, attributable to a special $39 billion charge taken in the third quarter. Excluding the special charge, GM lost $23 million in 2007, due also to large losses at GMAC caused by the subprime and housing crisis. That compares with a $2 billion loss in 2006.

GM posted $181 billion in revenue in 2007, down from $206 billion in 2006. GM said the decline was due to its sale of 51 percent of GMAC in November 2006 to Cerberus Capital Management.

Of its total revenues, GM’s automotive business generated record revenue of $178 billion in 2007, a $7 billion improvement over 2006, on the strength of GM's growth in emerging markets and favorable foreign exchange against a weaker U.S. dollar.

UAW Buyouts

Within days GM plans to offer U.S. hourly workers even more financial incentives to retire early than it did in the 2006 buyout plan. The incentives range from $45,000 for production workers to $62,500 to skilled-trades workers, the Wall Street Journal reported.

About 46,000 of GM's 74,000 UAW workers have the required 26 years of service making them eligible for early retirement. The remaining 28,000 workers will be offered between $70,000 and $140,000, depending on length of tenure, to take a buyout, the paper reported.

The average GM hourly employee is 49 years old, with more than 23 years of service.

The buyouts position GM to take advantage of the new labor contract negotiated with the UAW last fall that allows the automaker to hire new workers for some jobs at lesser pay.

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