GM Cuts '05 Earnings Outlook by 80 Pct

[Globalist]

Reuters
GM Cuts '05 Earnings Outlook by 80 Pct
Wednesday March 16, 10:33 am ET

DETROIT (Reuters) - General Motors Corp. (NYSE:GM - News) on Wednesday warned its 2005 earnings will be as much as 80 percent below its prior forecast due to slumping North American auto sales, sending its shares down 12 percent to a 13-year low.
"GM North America is, simply put, our 800-pound gorilla, and today's announcement shows how important it is that we get this business right," Chairman and Chief Executive Rick Wagoner told analysts and reporters on a conference call.

GM, the world's largest carmaker that has been steadily losing ground in its key North American market, also said it expects to post a first-quarter loss, compared with its prior forecast to break even or post a profit in the quarter.

The outlook drove other auto stocks lower in morning trade, with Ford Motor Co. (NYSE:F - News) down 3.4 percent.

GM said it now sees full-year earnings of about $1.00 to $2.00 per share, excluding special items, down from its previous target of $4.00 to $5.00 a share.

The company forecast a first-quarter loss of about $1.50 per share, excluding any special items. Previously it had targeted breaking even or being profitable for the quarter.

GM also cited stiff price competition and said it has cut its North American vehicle production, as well as saying that it needs to rein in health-care costs.

Credit-rating agency Standard & Poor's said it had revised its outlook on GM to negative from stable, setting the stage for a downgrade of GM to junk status.

A downgrade to junk status would likely significantly raise GM's borrowing costs.

David Cole, director of the Center for Automotive Research, said he expects others in the auto industry to have problems similar to GM's. "This will not be the only company where you're going to see this kind of comment," he said.

Higher fuel and raw material prices, such as steel, were creating a "perfect storm with a confluence of a large number of factors that are causing severe pressure across the entire industry" and particularly hurting companies like GM, he added.

GM said its previous outlook was based on North American vehicle-production volume of 1.25 million vehicles, but since then production schedules have been reduced by about 70,000 vehicles and pricing competition has been tougher than expected in North America.

"While we have made good progress in reducing costs over the last several years, the projected loss in North America reinforces our need to do much more, particularly in the area of health care," said GM Chief Financial Officer John Devine in a statement.

"One of the issues we've had for North America is the increasing drag of health-care costs on North American profitability," Devine added on the conference call with Wagoner.

"I don't have any silver bullets on heath care ... but clearly I think the weakening profitability this year has focused on our need to make progress on health care."

GM, the largest private provider of health care in the United States, had warned earlier that its medical expenses would increase by about $1 billion this year.

The company said it also expects negative operating cash flow in 2005 of about $2 billion, before its settlement with Italian automaker Fiat and its GM Europe restructuring, versus the previous target of positive $2 billion. GM cited lower volumes and decreased net income at GM North America.

S&P affirmed its long-term ratings on GM and General Motors Acceptance Corp. at "BBB-minus," one step above junk status, and their short-term "A-3" ratings. But it said in a statement, "We now view the rating as tenuous. The rating could be lowered at any point if we came to doubt that GM was on a trajectory to improving its financial performance to more satisfactory levels in 2006 and beyond."

GM's stock fell $3.77 to $29.95 in early trading on the New York Stock Exchange, after falling as low as $29.50. (Additional reporting by Reshma Kapadia, Dan Burns, Chris Sanders, Christian Plumb and Jonathan Stempel)

[Globalist]

Oil at $56 today. GM mix (more trucks than cars) will suffer.

Tough times need tough resolutions. I see this as a unique opportunity for GM to make radical moves on the issues facing its competitiveness. It's like war--The best defense is attack.

YOU CAN DO IT.

[AdmiralViscen]

God. This situation is coming to a head.

[gmsickofan]

Geez....

GM, clear lots of:

1. Blazers (fire sale)
2. Le Sabres
3. Grand Ams
4. Malibu "classics"
5. Astros and Safaris
6. Sunfires
7. Ventures and Montanas
8. 2005 Impalas / Monte Carlos
9. Bonnevilles (non GXP)
10. Aztek

Stop producing these right now, not later. Take the hit. Clear the lots of what has aready stopped production. Just get rid of this junk. Its outdated, uncompetitive, and no one wants it except bargain hunting fleet junkies. It hurts your image. Clean the friggin' slate.

These models make your whole image come off like a bargain bin company, and you can't afford it.

[Perian]

Originally Posted by gmsickofan

Geez....

GM, clear lots of:

1. Blazers (fire sale)
2. Le Sabres
3. Grand Ams
4. Malibu "classics"
5. Astros and Safaris
6. Sunfires
7. Ventures and Montanas
8. 2005 Impalas / Monte Carlos
9. Bonnevilles (non GXP)
10. Aztek

Stop producing these right now, not later. Take the hit. Clear the lots of what has aready stopped production. Just get rid of this junk. Its outdated, uncompetitive, and no one wants it except bargain hunting fleet junkies. It hurts your image. Clean the friggin' slate.

These models make your whole image come off like a bargain bin company, and you can't afford it.

No can do.

GM has incredible fixed costs. It's just not this simple.
GM stock is now (11:44 03/16) down 12.85% and is dragging Ford along for the ride. When people pick up their newspapers tomorrow and read about this, the last thing on their mind will be buying a GM vehicle.

Bonus: S & P just downgraded GM's outlook to negative.

This is just awful.

[gmsickofan]

Originally Posted by Perian

No can do.

GM has incredible fixed costs. It's just not this simple.
GM stock is now (11:44 03/16) down 12.85% and is dragging Ford along for the ride. When people pick up their newspapers tomorrow and read about this, the last thing on their mind will be buying a GM vehicle.

Bonus: S & P just downgraded GM's outlook to negative.

This is just awful.

Maybe it is time for someone at GM to make a painful, expensive choice and just DO it.

[Perian]

Originally Posted by gmsickofan

Maybe it is time for someone at GM to make a painful, expensive choice and just DO it.

There is one very painful solution...

Chapter 11.

[mgescuro]

Originally Posted by Perian

There is one very painful solution...

Chapter 11.

Looks more and more likely, doesn't it??? I said 2008 for bankruptcy. I think 2007 now.

[Taycron]

This would be a good time for GM to cut out all the fat...

[87aero]

Wow, really wow. Declaring your earnings outlook to be 80% lower? 80% is a huge percentage. They may as well have included chpater 11 in their outlook. I'm all for being realistic, but GM needs a little more self-esteem and confidence in their line-up. Much time remains for the 2005 model year to improve.

[GMfan2381]

Ouch. Things are really not looking good today. I was expecting 05 to be a weak year, but 80%... Thats nuts. I imagine Toyota is going to pick up a huge gain this year from this There needs to be some major restructuring done, if Chapter 11 can do that then it needs to be done. If GM needs to do something drastic to turn around then Im all for it, but they need to pull out of this nosedive they are in right now.
GM cant shrug off alot of their old models simply because they need to keep a certian amout of revenue coming in. I would love the Blazer to go bye-bye but there needs to be another line to pick up the revenue they would loose by not selling it.
I hope GM has a plan, because right now it looks like there is tough times ahead

[desmo9]

If Chapter 11 finally busts the UAW, I'm all for it.

UAW wage chart, from their sources:


Janitor Assembler Tool & Die

2004 $25.32 $25.95 $30.37

2008 $27.78 $28.44 $33.09

Anybody reading this meets the qualifications for Janitor and Assembler. How many of you make over $25 an hour?

UAW membership are currently paid about three times market rate wages, and stand get 10% more over the life of the current contract. This does NOT include the signing bonuses to ratify the contract, which were at least $3000 a person.

Secondly, the union did not budge on healthcare. Instead of softening the blow to GM's balance sheet, they stood their ground and demanded more than before. Here's their snippet:

"Our UAW bargaining teams in the auto industry set a clear goal at the very beginning of these negotiations: no cost-shifting in health care.

Thanks to exceptional solidarity and resolute bargaining, we were able to achieve this goal and more.

At a time millions of workers are facing health care cutbacks, UAW members at GM and Delphi will retain full employer-paid health care: no cost-shifting, no benefit takeaways.

And despite an extremely challenging bargaining environment, we were able to add significant health benefits for GM and Delphi workers in preventive care, testing and screening, vision and dental care, well baby care and other areas."

[69nova]

How can a forecast be off 80%!! 8% yes, 80% no way. Didn't we read not too long ago about management getting bonuses? So, do they return them due to this new release of bad news?

[GMfan2381]

Originally Posted by desmo9

If Chapter 11 finally busts the UAW, I'm all for it.

UAW wage chart, from their sources:


Janitor Assembler Tool & Die

2004 $25.32 $25.95 $30.37

2008 $27.78 $28.44 $33.09

Anybody reading this meets the qualifications for Janitor and Assembler. How many of you make over $25 an hour?

UAW membership are currently paid about three times market rate wages, and stand get 10% more over the life of the current contract. This does NOT include the signing bonuses to ratify the contract, which were at least $3000 a person.

Secondly, the union did not budge on healthcare. Instead of softening the blow to GM's balance sheet, they stood their ground and demanded more than before. Here's their snippet:

"Our UAW bargaining teams in the auto industry set a clear goal at the very beginning of these negotiations: no cost-shifting in health care.

Thanks to exceptional solidarity and resolute bargaining, we were able to achieve this goal and more.

At a time millions of workers are facing health care cutbacks, UAW members at GM and Delphi will retain full employer-paid health care: no cost-shifting, no benefit takeaways.

And despite an extremely challenging bargaining environment, we were able to add significant health benefits for GM and Delphi workers in preventive care, testing and screening, vision and dental care, well baby care and other areas."

That pisses me off I would kill for 25 an hour simply for being in a union! Dont they see what they are doing to their company?!

Talk about killing the goose that laid the golden egg...

[mgescuro]

Originally Posted by desmo9

If Chapter 11 finally busts the UAW, I'm all for it.

UAW wage chart, from their sources:


Janitor Assembler Tool & Die

2004 $25.32 $25.95 $30.37

2008 $27.78 $28.44 $33.09

Out of sheer curiosity, I went to salary.com to price out what a Janitor should make in the Grand Rapids, MI area. Giving UAW the benefit of the doubt, I priced a "Sr. Janitor."

http://swz.salary.com/salarywizard/l...d+Rapids%2C+MI

Media salary is $27,220. Far lower than the $25.32/hr UAW janitors make.