GM's $39B loss a record

No. 1 U.S. automaker posts much bigger operating loss than forecast as huge charge weighs on company.

General Motors, no stranger to hard times and red ink, still managed to shock Wednesday when it reported an operating loss more than 11 times larger than expected and a $39 billion charge that was among the biggest profit hits ever reported.

The nation's No. 1 automaker, which was hit with a soft U.S. auto market and a two-day strike by the United Auto Workers union during the quarter, lost $1.6 billion, or $2.80 a share, excluding special items.

GM posted a huge $39 billion loss in the third quarter due to accounting charges, even as its global auto operations reported a profit.

That compares to the forecast of a 25-cent-a-share loss from analysts surveyed by earnings tracker Thomson First Call and earnings per share of $497 million, or 88 cents, on that basis in the year-earlier period.

Among the problems hurting GM results was a $2.3 billion loss in the home loan business at GMAC due to problems from the meltdown in subprime mortgages. GM sold a majority of GMAC but still owns 49 percent of the lender.

In addition, GM took a huge charge in the quarter related to the writedown of tax credits for losses over the last three years.

That caused it to post a net loss of $39 billion, or $68.85 a share, for the third quarter, compared with the net loss of $147 million, or 26 cents a share, in the year-earlier period. Only a gain from the sale of the Allison Transmission unit stopped the loss from being worse.

The report caused shares of Dow component GM to be down 5 percent in midday trading, helping to spark a 200-point selloff.

GM results showed that worldwide, its automotive operations earned $122 million from continuing operations, excluding special items, in the quarter. That was an improvement from the loss of $455 million on that basis in the year-earlier period.

But those auto earnings were from the company's overseas auto operations. Its core North American auto unit still lost $247 million in the quarter, excluding special items. That's an improvement from the $660 million it lost on that basis a year earlier, although it's worse than the narrow profit GM reported in North America in the period.

Revenue from auto sales rose to $43.1 billion from $39.6 billion a year earlier. That topped First Call's revenue forecast of $40.3 billion. The automaker sold a record 2.39 million cars and trucks worldwide in the quarter, enough to edge back in front of Toyota Motor in the race to be the world's largest automaker in terms of vehicle sold.

Earlier Wednesday, GM rival Toyota Motor (Charts), which had been hit by sluggish sales in its two most important markets, Japan and the United States, nevertheless reported profit rose 11 percent and raised its earnings forecast for the full year.

Ford Motor, which lost its long-held title of No. 2 U.S. automaker to Toyota this year, is due to report results Thursday. It is also forecast to report an operating loss.

Source - CNN Money