GM posts $800 million loss in 2Q

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Thread: GM posts $800 million loss in 2Q

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    GM posts $800 million loss in 2Q

    https://www.detroitnews.com/story/bu...-q/5528019002/

    Detroit — General Motors Co.'s reported a second-quarter income loss of about $800 million, a 132% year-over-year drop as a result of of the coronavirus pandemic, the automaker said Wednesday.

    Revenue totaled $16.8 billion in the second quarter, down 53% from the second quarter of 2019. GM burned through $7.8 billion to make it through the quarter.

    The pandemic forced GM and ts rivals to close plants for half of the second quarter, which runs April through June. Plants reopened in mid-May. With some dealers in desperate need of inventory, GM and other automakers have pushed to resume full production even as they battle high absenteeism amid the continuing pandemic.

    "We have a track record of making swift and strategic decisions to ensure our long-term success for the benefit of all our stakeholders," CEO Mary Barra said in a statement. "We will continue to drive the necessary change throughout the company to enable growth as we prepare to deliver a world with zero crashes, zero emissions and zero congestion.”

    With state economies shut down for much of the second quarter, GM's sales dipped 34% year over year, but demand for its profit-rich trucks remained "resilient," GM said. Chevrolet Silverado light-duty sales came in at 89,465, down 18.6% from last year. Silverado heavy-duty sales were off just 0.7% with 31,279 sales. GMC Sierra light-duty sales came in at 38,825, down 9.5% from last year. Sierra heavy-duty sales were up 7.6% with 14,999 sales.


    GM is upping its production levels of the light-duty trucks at the Fort Wayne, Indiana plant starting in September, which will allow the automaker to push out an additional 1,000 units a month.

    Meanwhile, GM is still struggling through absenteeism issues at plants. High levels of absent workers nearly pushed the automaker to suspend the third shift at the Wentzville, Missouri, truck plant. Instead the Detroit automaker came up with a plan to keep all three shifts operating that could include transferring workers from other plants like the Spring Hill, Tennessee, plant that just lost a shift because of lack of demand for its product.

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    Re: GM posts $800 million loss in 2Q

    Amazing they only lost $800 million, but that cash burn.... Anyone who thinks corporations are bottomless wells of cash just need to look at that, almost $8 billion gone, they can't sustain that forever.

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    Re: GM posts $800 million loss in 2Q

    $0.758 Billion, seems pretty-good all things considered.

    The part I'm confused/challenged with is this...................

    "GM burned through $7.8 billion to make it through the quarter."

    Not sure how that computes?

    Last edited by Ed753; 07-29-2020 at 11:47 AM.
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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by Ed753 View Post

    The part I'm confused/challenged with is this...................

    "GM burned through $7.8 billion to make it through the quarter."

    Not sure how that computes?

    I will help.

    You recall the New York Coffee House? That's just a Drop in Da Bucket now.

    It will be interesting to see "Mary's" income for 2020. Not that Covid is Her fault, but +/- Income vs Performance Salary wise. I mean $7.8 Billion could have been worse, NO?
    Last edited by InCogKneeToe; 07-29-2020 at 09:39 AM.

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    Re: GM posts $800 million loss in 2Q

    I wonder if GM is trying to address the high rates of absenteeism in their plants?

    First, the corrupt UAW leadership ordered their workers to strike for 40-days, and now many are not reporting for work. All of the absences cannot be a result of illness.

    I wish GM and the UAW would explain thei reason the workers are staying away in droves.

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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by InCogKneeToe View Post
    I will help.

    You recall the New York Coffee House? That's just a Drop in Da Bucket now.

    It will be interesting to see "Mary's" income for 2020. Not that Covid is Her fault, but +/- Income vs Performance Salary wise. I mean $7.8 Billion could have been worse, NO?
    Need to see how other auto companies cash burn looks to see if $7.8B is a "good" number or not. But, also have to take even that with a grain of salt too. A lot of factors go into that cash burn - for example, sounds like GM kept their R&D on electrics & self driving going, so that's a big cash burn (but will not hit the P&L) vs. another company that might have put that on hold vs. other companies not even doing that kind of research. If the economy comes back quickly, then MB will look good for keeping that R&D going, if it is a slow rebound and cash burn continues, then her gamble doesn't look good.

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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by BlackGTP View Post
    Need to see how other auto companies cash burn looks to see if $7.8B is a "good" number or not. But, also have to take even that with a grain of salt too. A lot of factors go into that cash burn - for example, sounds like GM kept their R&D on electrics & self driving going, so that's a big cash burn (but will not hit the P&L) vs. another company that might have put that on hold vs. other companies not even doing that kind of research. If the economy comes back quickly, then MB will look good for keeping that R&D going, if it is a slow rebound and cash burn continues, then her gamble doesn't look good.
    PSA made 595 million Euros profit for the first half of 2020

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    Re: GM posts $800 million loss in 2Q

    It all depends on how quickly America re opens. They could technically make a living in the third quarter if there is no closure. Also, seems like they took a few one time charges because they could

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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by InCogKneeToe View Post
    I will help.

    You recall the New York Coffee House? That's just a Drop in Da Bucket now.

    It will be interesting to see "Mary's" income for 2020. Not that Covid is Her fault, but +/- Income vs Performance Salary wise. I mean $7.8 Billion could have been worse, NO?
    Not really helping...............

    They essentially lost $0.8 Billion, but burned through another $7.0 Billion of cash

    (I had a typo in my original post, now fixed)


    Quote Originally Posted by mbukukanyau View Post
    It all depends on how quickly America re opens. They could technically make a living in the third quarter if there is no closure. Also, seems like they took a few one time charges because they could
    On-time charges means loss is bigger than it would have been, means the "burn" was even greater.

    I'll have to dig it up, but I want to say 15 billion was the cash GM had on hand going into this mess?
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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by 1999 White C5 Coupe View Post
    I wonder if GM is trying to address the high rates of absenteeism in their plants?

    First, the corrupt UAW leadership ordered their workers to strike for 40-days, and now many are not reporting for work. All of the absences cannot be a result of illness.

    I wish GM and the UAW would explain thei reason the workers are staying away in droves.
    +1
    The unusually high rates of absenteeism at certain GM facilities are not due to sick/family/medical leave or anything else related to the Families First Coronavirus Response Act (FFCRA or Act). A lot of people within and external to General Motors would like to know what's going on here.
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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by Ed753 View Post
    Not really helping...............

    They essentially lost $0.8 Billion, but burned through another $7.0 Billion of cash

    (I had a typo in my original post, now fixed)




    On-time charges means loss is bigger than it would have been, means the "burn" was even greater.

    I'll have to dig it up, but I want to say 15 billion was the cash GM had on hand going into this mess?

    This should help: A big piece will be how they make payments on payables. Most companies stretch out as long as possible for when they actually pay an invoice, most are probably at 60 days if not more.

    Let's assume GM is using 60 days and use a $100 invoice as an example:

    On February 1, 2020 GM buys a $100 screw to replace one on a line in a plant. In February that screw cost will hit the P&L (debit P&L - Repairs and Maintenance $100) and the offset is to credit Accounts Payable $100 on the balance sheet. Until they pay for this invoice there is no cash burn but it is a hit to your net income.

    Now it's 60 days later, April 1 - in the 2nd quarter. Time to pay that invoice. The accounting is to debit accounts payable to zero out the liability and credit cash to record the payment. Crediting the cash is the cash burn.

    So effectively 2/3's of GM's (or any company) Q1 payables are paid in Q2. Typically the cash generated from ongoing operations will cover this, but in this extreme case GM was shut down and had no incoming cash to offset the outgoing cash. If we have a quick rebound in Q3 you'll see big cash increases as the Q2 payables were low as they weren't buying any raw materials, etc. that they have to pay for in Q3.

    And there are other types of cash outlays that have to keep on being made even if GM isn't producing.

    February 1 - no cash impact:
    Debit P&L Repairs & Maintenance $100
    Credit Balance Sheet Accounts Payable $(100)


    April 1 - cash leaves GM:
    Debit Balance Sheet Accounts Payable $100
    Credit Balance Sheet Cash $(100)

    In normal times companies will play with their cash flow by holding payments for a day (say from December 31st to January 1st) to take the cash flow out of the current year being reported on and put it in the next year. That get's you a one time bump, but then in the new year you have to pay the piper.

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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by BlackGTP View Post
    This should help: A big piece will be how they make payments on payables. Most companies stretch out as long as possible for when they actually pay an invoice, most are probably at 60 days if not more.

    Let's assume GM is using 60 days and use a $100 invoice as an example:

    On February 1, 2020 GM buys a $100 screw to replace one on a line in a plant. In February that screw cost will hit the P&L (debit P&L - Repairs and Maintenance $100) and the offset is to credit Accounts Payable $100 on the balance sheet. Until they pay for this invoice there is no cash burn but it is a hit to your net income.

    Now it's 60 days later, April 1 - in the 2nd quarter. Time to pay that invoice. The accounting is to debit accounts payable to zero out the liability and credit cash to record the payment. Crediting the cash is the cash burn.

    So effectively 2/3's of GM's (or any company) Q1 payables are paid in Q2. Typically the cash generated from ongoing operations will cover this, but in this extreme case GM was shut down and had no incoming cash to offset the outgoing cash. If we have a quick rebound in Q3 you'll see big cash increases as the Q2 payables were low as they weren't buying any raw materials, etc. that they have to pay for in Q3.

    And there are other types of cash outlays that have to keep on being made even if GM isn't producing.

    February 1 - no cash impact:
    Debit P&L Repairs & Maintenance $100
    Credit Balance Sheet Accounts Payable $(100)


    April 1 - cash leaves GM:
    Debit Balance Sheet Accounts Payable $100
    Credit Balance Sheet Cash $(100)
    Got-it, so then there should be a "windfall" in Q3? They don't have to pay for all the screws they didn't buy in Q2 when plants were idled, but now selling cars they are making.
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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by Ed753 View Post
    Got-it, so then there should be a "windfall" in Q3? They don't have to pay for all the screws they didn't buy in Q2 when plants were idled, but now selling cars they are making.
    Yes, potentially, though if they start up quickly at the beginning of the quarter and incur a lot of start up costs then those payments will be due within the quarter, so it could greatly eat into the potential windfall, it'll all be down to timing. However, they'll never get all of that cash burn back. If the economy returns nicely in Q3 the cash flow will probably look favorable to Q3 2019, but not $7B better. Some of the expenses they just stopped, no maintenance, no buying screws, furlough your hourly employees, etc, but some of that cash burn was making debt payments, property taxes, etc - for those there was no "vacation" from the expense while the plants were shut down.... If that makes sense, it's clear in my mind but I'm having trouble getting it into words.

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    Re: GM posts $800 million loss in 2Q

    Quote Originally Posted by BlackGTP View Post
    Yes, potentially, though if they start up quickly at the beginning of the quarter and incur a lot of start up costs then those payments will be due within the quarter, so it could greatly eat into the potential windfall, it'll all be down to timing. However, they'll never get all of that cash burn back. If the economy returns nicely in Q3 the cash flow will probably look favorable to Q3 2019, but not $7B better. Some of the expenses they just stopped, no maintenance, no buying screws, furlough your hourly employees, etc, but some of that cash burn was making debt payments, property taxes, etc - for those there was no "vacation" from the expense while the plants were shut down.... If that makes sense, it's clear in my mind but I'm having trouble getting it into words.
    Actually "Start Up" was in May, so Start Up Costs should have shown up in June (2nd Quarter) 3rd Quarter should be Gravy.

    But my "Prediction" (just Prediction) we will see similar Losses, if not Greater. 50-60 Days Supply, followed by "Employee Pricing with 0%" means GM was actively trying to Reduce this 2nd Quarter Losses at the expense of 3rd Quarter Earnings.

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    Re: GM posts $800 million loss in 2Q

    Things aren't looking up any time soon it seems. I just visited a Chevy lot and they normally stock at least 50 Silverado's. Well they only had 6 on the lot, 1 was a base HD, and another was one of those Rocky Ridge editions, the 4 left were just some LT 1500's. I thought it was bad after the strike, no wonder they are trying to push more out.

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