General Motors records $39 billion loss on tax hit
General Motors with huge 3Q loss of $39 billion. The loss was the biggest ever for a quarter by GM.
Most of the loss - $38.6 billion, to be precise - was explained by the largest US automaker in a statement late Tuesday. It expects to lose deferred tax assets in the US, Canada and Germany. To qualify for deferred tax assets, a company must be reasonably confident it will have taxable income. General Motors said that confidence has been shaken by sluggish earnings growth in its core North American automotive market and setbacks at GMAC Financial Services, its lending business. Besides that charge, GM also took a $3.5 billion gain on the sale of Allison Transmission and took $1.6 billion in pension service costs, $400 million for restructuring actions and $400 million related to a reserve adjustment for supplier and former unit Delphi Corp. Even excluding all the items it would have swung to a loss of $1.6 billion, or $2.80 a share, after earning $497 million, or 88 cents a share, in the year-ago period.
Analysts polled by Thomson Financial expected a loss of 25 cents a share. GM said there was a “significant” decline in net income at GMAC and increased corporate expenses. GMAC, of which General Motors holds 49%, lost $1.6 billion. It was caught up in the subprime turmoil that has rocked mortgage and credit markets. Turning to its core business, automotive revenue rose to $43.1 billion from $39.6 billion after the company sold 4% more cars and trucks. GM linked the rise to “exceptionally strong” demand in emerging markets and improving developed-market demand. “We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging North America market conditions,” said CEO Rick Wagoner in a statement.
In North America, its adjusted loss from continuing operations narrowed to $247 million from $660 million, while its European loss widened to $90 million from $39 million. But Asia-Pacific adjusted net income rose to $138 million from $57 million, on strong export growth from GM Daewoo, continued strong sales and profitability in China, and improved earnings in India and Australia. Overall revenue fell to $43.83 billion from $48.89 billion after the sale of most of GMAC. (marketwatch.com)
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