General Motors Corporation on November 7 announced its financial results for the third quarter of 2007, marked by record global sales, further improvement in its core automotive business driven by solid financial performance in key growth markets around the world and improved liquidity.
“We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging
The company’s improved performance in its automotive operations was more than offset by special charges of $37.4 billion related largely to a previously announced valuation allowance against its deferred tax assets, as well as lower reported GMAC Financial Services income, down $630 million vs. the year-ago quarter as a result of continued pressures in the mortgage industry.
GM reported a net loss of $39 billion (including Allison Transmission, which is classified as a discontinued operation), or $68.85 per diluted share, for the third quarter of 2007, compared with a reported net loss of $147 million, or $.26 per diluted share, in the year-ago quarter.
Special items included a net non-cash charge of $38.6 billion due to a valuation allowance against deferred tax assets related to operations in the
Excluding special items, GM had a 2007 third-quarter adjusted net loss of $1.6 billion, or $2.80 per diluted share, compared to net income of $497 million, or $.88 per diluted share, in the year-ago quarter. The variance was driven primarily by a significant decline in net income at GMAC, as well as increased corporate expense related to legacy cost, foreign exchange and various 2006 tax benefits, partially offset by improved performance in automotive operations.
GM Automotive Operations
GM’s global automotive operations posted net income of $122 million from continuing operations on an adjusted basis in the third quarter of 2007 (reported net loss of $40.6 billion), an improvement of $577 million compared to an adjusted net loss from continuing operations of $455 million (reported net loss of $401 million) in the same quarter 2006. Results for GM’s automotive operations, specifically GMNA, exclude Allison Transmission, which was classified as a discontinued operation as a result of the sale of that business which was concluded in August 2007.
GM generated record third-quarter automotive revenue of $43.1 billion. The company also achieved record global third-quarter sales of 2.39 million cars and trucks, up 4 percent compared to the third quarter 2006, driven by exceptionally strong demand in emerging markets and improved performance in developed markets. GM also set a number of third-quarter sales records around the globe, including a 22 percent increase in GMLAAM, 16 percent increase in the GMAP region and 15 percent gain in GME.
“We continue to see solid progress in the fundamentals of our automotive business. We’re very pleased with our strong sales performance in key markets outside of North America, and growing retail momentum in the
GMNA had an adjusted net loss from continuing operations of $247 million in the third quarter 2007 (reported net loss from continuing operations of $38.2 billion, which includes charges of approximately $36.5 billion for a valuation allowance against its deferred tax assets and $1.3 billion for pension service costs related to prior labor agreements), compared to an adjusted net loss of $660 million from continuing operations in the third quarter 2006 (reported net loss from continuing operations of $667 million). GMNA’s improved adjusted earnings reflect favorable mix, pricing and better warranty performance, which were partially offset by lower volume and increased material cost.
GME posted an adjusted net loss of $90 million in the third quarter (reported net loss of $2.9 billion, which includes charges of $2.5 billion for a valuation allowance against deferred tax assets in Germany and restructuring charges of $262 million), compared to $39 million loss in the third quarter of 2006 (reported net loss of $126 million). The variance in adjusted net income reflects the softness of the German market and unfavorable currency exchange, which was partially offset by improved pricing and higher volume.
GME achieved record third quarter sales of about 524,000 units, aided by continued momentum of GME's multi-brand strategy during the period. Chevrolet is amongst the fastest growing global vehicle brands in
GMAP recorded adjusted net income of $138 million in the third quarter (reported net income also $138 million), compared with $57 million in the year ago period (reported net income of $205 million, which included $148 million in favorable tax-related items). This favorable earnings performance was driven largely by strong export growth from GM Daewoo, continued strong sales and profitability in
GM achieved 16 percent sales growth in the Asia Pacific region, resulting in record third quarter sales of 327,500 units. GM China sold 230,000 vehicles, a 21 percent increase compared with the year ago period. GM sales in the region were also aided by the strong performance of GM Daewoo products, including the Chevrolet Captiva.
GMLAAM achieved all-time record earnings and quarterly sales in the third quarter, posting adjusted earnings of $340 million (reported net income also $340 million), up 86 percent compared with strong earnings in the year ago period of $183 million (reported net income also $183 million). The earnings improvement was driven primarily by volume growth, favorable pricing and vehicle mix.
GMLAAM set a third quarter-sales record of over 329,000 vehicles, up almost 22 percent year-over-year. All-time sales records were achieved in
As a standalone company, GMAC Financial Services reported a net loss of $1.6 billion for the third quarter 2007, compared to a net loss of $173 million in the third quarter 2006. The reported results for the third quarter of 2007 included a $455 million goodwill impairment charge at Residential Capital, LLC (ResCap), while a goodwill impairment charge of $695 million related to GMAC Commercial Finance was reflected in results for the third quarter of 2006.
Results were dominated by the effects of the dislocation in the mortgage and credit markets on the real estate finance business, which more than offset the continued strong performance at GMAC's automotive finance, insurance and other operations.
GM recognized $757 million of the net loss attributable to GMAC as a result of its 49 percent equity interest and accrued preferred dividends (reported net loss of $803 million).
Cash and Liquidity
GM continues to have a strong liquidity position. Cash, marketable securities and readily available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust grew to $30 billion as of September 30, 2007, up from $27.2 billion on June 30, 2007. The balance includes $5.4 billion of net cash proceeds from the completion of the Allison Transmission transaction in August 2007.
GM had negative adjusted automotive operating cash flow of $2.5 billion in the third quarter of 2007, improved from a negative $3.9 billion in the third quarter 2006.