GM Stock To Open DOWN 14%

[Perian]

GM Previews Brutal Year

By TSC Staff
3/16/2005 9:20 AM EST

Updated from 8:26 a.m. EST

General Motors (GM:NYSE - commentary - research) stunned the stock market Wednesday with an ominous profit warning that cut its 2005 earnings outlook by more than half.

The No. 1 automaker expects to lose $1.50 a share in the first quarter and earn just $1 or $2 a share for all of 2005. The company had previously predicted a breakeven first quarter and earnings of $4 to $5 a share for 2005.

The stock was recently down $4.32, or 12.8%, on Instinet to $29.40, falling through its 52-week low of $33.69. The broader bond market held firm on the news as GM's corporate debt has been trading at junk spreads for several weeks. Still, those spreads widened sharply Wednesday.

GM's $50 billion of corporate debt is currently rated at BBB- at Standard & Poor's, the agency's lowest investment grade level. The company's debt is the second largest component of the Lehman Brothers corporate bond index behind Ford.

Wednesday's guidance reflects "lower North American sales and production volumes, a tougher pricing environment, and a more car-based sales mix. At the same time, GM's other automotive regions and GMAC are all on track to meet or beat their 2005 net income targets."

GM's previous first-quarter earnings guidance was based on North American vehicle production of 1.25 million. Since then, production schedules have been reduced by about 70,000 vehicles and pricing has become more competitive in North America.

GM also expects negative operating cash flow in 2005 of approximately $2 billion before charges related to its settlement with Fiat and the restructuring of its European division. It had previously targeted positive cash flow of $2 billion. The revision is primarily attributable to lower volume and decreased net income at GM North America.

For the last three years, GM has derived the lion's share of its profit from its financing arm, General Motors Acceptance Corp. In its release Wednesday, the company said GMAC "is on target to exceed expectations" despite higher interest rates and wider spreads.

"Much of GMAC's success stems from its ability to diversify its funding sources," GM said in a release. "We're confident that GMAC can continue to sustain strong levels of profitability."

GM has reportedly weighed a spinoff of GMAC in recent months as a way of shielding it from the possibility of a ratings agency downgrade of the parent's corporate credit rating.



Source: Associated Press
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GM Sees 1Q Loss, Lower 2005 Results
Wednesday March 16, 7:56 am ET
General Motors Sees 1Q Loss, Cuts Full-Year Estimate on Lower North American Production, Sales

DETROIT (AP) -- General Motors Corp. on Wednesday forecast a hefty loss for the first quarter and trimmed its full-year estimate, citing cuts in vehicle production and lower-than-expected sales in North America.

Shares of General Motors sank on the news, falling $2.50, or 7.3 percent, to $31.83 in premarket activity.

The world's top automaker now expects a first-quarter loss -- excluding one-time items -- of $1.50 per share, compared with earlier views of breaking even to posting a small profit.

For the year, earnings are also projected in the range of $1 to $2 per share, reduced from a previous forecast of $4 to $5 per share.

Analysts surveyed by Thomson First Call were expecting a quarterly loss of 3 cents per share on $38.72 billion in sales, and yearly income of $3.33 per share, with sales reaching $155.31 billion.

GM earned $2.25 per share and had sales of $40.14 billion in last year's first quarter, and posted income of $6.40 per share on $161.54 billion in sales in 2004.

The company also said it anticipates negative operating cash flow of about $2 billion versus an earlier view to generate $2 billion in cash, attributable to lower volumes and decreased net income at its North American division.

Prior first-quarter guidance was based on North American vehicle output of 1.25 million vehicles, but production schedules have been reduced by about 70,000 vehicles while pricing remains more competitive than expected, GM said.

"The competitive environment that we face in North America means we must continue to find ways to reduce our costs and grow revenue," Vice Chairman and Chief Financial Officer John Devine said in a statement. "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 more, particularly in the area of health care."

GM added that the outlook for its other business units remains positive.

[Perian]

Originally Posted by Perian

particularly in the area of health care

Has anyone noticed that these words are now "Standard Equipment" in almost every GM financial press release?

GM is preparing the UAW for something...

[paul8488]

Wow. If ya wanted to worry about GM, reading the new posts today would help! Losing market share, high rebates on new models, cars sitting on lots for so long... where's the Solstice? We all need a big warm fuzzy GM hug!

[Perian]

Originally Posted by paul8488

Wow. If ya wanted to worry about GM, reading the new posts today would help! Losing market share, high rebates on new models, cars sitting on lots for so long... where's the Solstice? We all need a big warm fuzzy GM hug!

Maybe we should start praying:

03/06/05 8:34AM
On the Inet electronic brokerage network, GM was down $1.62, or 4.8 percent, at $32.10.

[tom3]

"Shares of General Motors sank on the news, falling $2.50, or 7.3 percent, to $31.83 in premarket activity"

Sure makes me want to invest in our pyramid/ponzi scheme of a stock market. Nice to see the fatcats can dump their shares before the exchanges open.

"we must continue to find ways to reduce our costs and grow revenue"

Or maybe "we" could improve quality and public perception of GM products, and get it right in the service departments? Said it before, Odd Lots pricing is not the way to sell $30,000 vehicles.

[Perian]

GM shares now at $ 30.15 in INET -- 12 year low.

[SSrevolution]

This is actually serious. On the lighter side though, think about this; GM has recently spent @$$loads of money revamping their entire line! As John T. Fogerty said "a calm before a storm."
SO! my solution =
-get rid of Saab
-use smarter marketing (i.e. advertising single cars and not every new one)
-revamp the truck line fast! The GM trucks are still among the best but sharing honors but we need to get back to the days of 3 years in a row of Car and Drivers best pickup.
-get your god forsaken Camaro back... nuff said
-get rid of the Silverado SS and SSR (yes I like them too but what purpose do these 2 thing really serve?) If the SSR was suppose to be an image builder it isnt working. But keep the Gibbs Silverado.
-Give these things a chance, they take time. People love the G6 and Colbalt, Corvette, the new Hummer, all new Caddy's, and the GTO should be a much bigger seller this year. Just give it time guys, nit time to panic yet. I'm not denying this problem but yes this is disheartening but just wait.

[SSrevolution]

BTW. Lutz must go ASAP!

[hudson32]

Originally Posted by SSrevolution

BTW. Lutz must go ASAP!

How shortsighted and stupid that is to do that. It would be a lot worse without Lutz. The culture at GM and the unions have long plagued the proud and giant company, and it takes more than one man to change it. Even Lutz I bet knows that a slumbering giant like GM takes more than a handful of good cars to change it.

[the Blue One]

Wall Street has a target price of $23. I think it should be closer to $20.
Either way the train wreck is not over until GM takes out the UAW once and for all to help control overhead.

[mgescuro]

Originally Posted by the Blue One

Wall Street has a target price of $23. I think it should be closer to $20.
Either way the train wreck is not over until GM takes out the UAW once and for all to help control overhead.

I agree. $20 is probably the real target here.
UAW needs to give some concessions. Have their workers pay for hwalthcare. Eliminate the job bank... or at least when the workers aren't worker, only pay them 50%... not 95%.