General Motors posts $3 billion loss

[Plex]

DETROIT (Reuters) - General Motors posted a narrower-than-expected quarterly loss on Wednesday as sales gains in Asia and Latin America overshadowed a slump in the U.S. market, sending its shares up 13 percent.

The No. 1 U.S. automaker fell to a net loss of $3.25 billion (1.63 billion pounds), or $5.74 per share, from a year-earlier profit, reflecting the impact of a costly supplier strike and waning demand in North America for GM's most profitable vehicles.

But excluding $2.2 billion in charges for struggling former subsidiaries, the results were better than forecast and investors applauded GM's ability to avoid a worse result at a time of mounting pressure in its home market.

GM took a $1.45-billion charge for its remaining investment in finance company GMAC in the first quarter and a $731-million charge for its exposure to the bankruptcy of auto parts supplier and former subsidiary Delphi Corp.

Revenue declined 2 percent to $42.7 billion.

Excluding charges, GM reported a first-quarter loss of $350 million, or 62 cents per share, much narrower than the average Wall Street forecast for a per-share loss of $1.67 as tracked by Reuters Estimates.

GM, which has lost a combined $51 billion over the past three years, said the quarterly results pointed to some progress in its turnaround effort.

But executives also cautioned that the Detroit-based automaker would face a slower recovery in the United States in the second half of this year and a faster shift out of more profitable trucks and SUVs in response to higher gas prices.

Analysts had a mixed reaction to GM's results, including its negative cash flow of $3.8 billion in the quarter.

"Rationalizations abound, but we are left wondering: where is the bottom in North America?" Calyon Securities Mark Warnsman said in a note. "For a company in turnaround, cash flow is the ultimate test -- a test on which GM is failing to achieve a passing grade."

But JP Morgan analyst Himanshu Patel said the GM results were "not as bad as feared."

Some analysts noted that GM shares had been due for a bounce at the first sign of good news, due to a buildup in short positions during a 15 percent slide in the share price since the start of the year. Holders of short positions hope to buy back borrowed shares at a lower price, sometimes leading to a rebound in prices.

RECOVERY SEEN LESS 'ROBUST'

GM Chief Financial Officer Ray Young said GM was still forecasting a second-half recovery in U.S. auto sales but now believed the industry turnaround would be weaker than it had expected at the start of the year.

"We still believe there is going to be a second-half recovery, but probably not as robust as what we had thought at the beginning of the year," he said.

Lehman Brothers analyst Brian Johnson said he was encouraged by GM's "recognition" of a tougher sales climate in North America and its recent decision to cut planned truck production by 138,000 vehicles in 2008.

"These cuts will improve GM and hence industry capacity utilization, helping to improve pricing dynamics," he said.

GM earned $392 million before taxes and items on its auto operations with earnings from Europe, Latin America and Asia combining to outstrip a $611 million loss in North America.

In its home market, GM has been pressured by a two-month United Auto Workers strike against Detroit-based American Axle & Manufacturing Holdings, a major supplier to GM.

GM said the strike had cost 100,000 units of production and depressed first-quarter results by about $800 million.

The automaker has shut down or partly idled about 30 plants because of that strike, which has mainly affected production of slower-selling large SUVs and pickup trucks.

But the strike has also allowed GM to run down inventory sharply and to resist pressure from dealers to offer stepped-up sales incentives. GM's dealer stock hit a 25-year low for April at about 840,000 vehicles at month end.

"We're trying to manage our overall level of incentive activity, period," said GM President and Chief Operating Officer Fritz Henderson.

Henderson said GM had not anticipated the spike in oil prices to $120 per barrel or the resulting rapid defection by American consumers away from more expensive trucks.

"I think we missed that. I think a lot of people did and therefore the change in market mix has happened a lot faster than we thought," Henderson said.

GM has also struggled with the legacy of its troubled former subsidiaries: Delphi and GMAC.

GMAC posted a first-quarter loss of $589 million and warned that it might not be profitable again until 2009 because of falling home prices and tight credit markets.

GM wrote down the value of its investment in GMAC after concluding that the U.S. mortgage market was unlikely to recover in the near term. GM kept a 49-percent stake in GMAC after selling the rest to private equity firm Cerberus Capital Management in 2006.

GM's global vehicle sales fell nearly 1 percent to 2.25 million vehicles in the first quarter, falling far behind rival Toyota, which sold 2.41 million vehicles.

GM and Toyota had been roughly even in 2007 for the top spot among the world's automakers in sales volume.

Reuters