- The Washington Times - Wednesday, February 13, 2008

General Motors Corp., the nation’s largest automaker, yesterday announced it lost $38.7 billion in 2007, the biggest annual loss reported by an automaker and the fourth-largest corporate loss in U.S. history.

The nation’s largest automaker also announced it will offer buyouts to its entire hourly domestic work force, with hopes of hiring replacements at half the cost.

Last year, GM streamlined production, negotiated a historic labor agreement with the United Auto Workers union and aggressively increased operations in Latin America and Asia, Chairman and Chief Executive Officer Rick Wagoner said yesterday.

GM’s newest cars, including the Chevrolet Malibu sedan and Buick Enclave SUV, sold well last year, contributing $400 million to the company’s bottom line, but those gains hardly put a dent in the massive annual loss.

The 2007 loss topped GM’s previous record in 1992, when the company lost $23.4 billion because of a change in health care accounting.

Excluding a $39 billion third-quarter charge and other special items, GM lost just $23 million (4 cents per share) in 2007, compared with net income of $2.2 billion ($3.84) in 2006, beating Wall Street’s expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share.

GM shares fell 52 cents, or 2 percent, to close at $26.60 yesterday on the New York Stock Exchange, after rising as much as 2.6 percent earlier in the day.

Mr. Wagoner said the weak U.S. economy and high commodity prices hurt GM’s turnaround efforts in the U.S.

The company’s decision to reduce low-profit sales to rental car companies by 110,000 in 2007 also affected U.S. sales, he said.

During a conference call with analysts and the press, GM Chief Financial Officer Fritz Henderson said 2008 will be difficult, but the company sees the potential for significant earnings increases by 2010 or 2011 once it reduces its labor costs and transfers its retiree health care costs to a new UAW-run trust.

“Despite progress outside the U.S., competitive pressures in the U.S. will continue to pressure GM and, hence, overall operational results,” said Brian A. Johnson, an analyst with Lehman Brothers, a financial investment firm in New York.

GM is making a range of offers to hourly employees including cash payments of as much as $140,000 to the remaining 74,000 workers represented by the UAW. GM said the buyouts are not intended to reduce its work force but rather to bring in new workers at lower wages. All of the Detroit automakers are permitted to pay new workers half as much as the $28 per hour current employees earn under a two-tier wage plan laid out in the agreement reached last fall.

About 46,000 GM employees are eligible to retire today, and they can take pension incentives worth between $45,000 to $62,500 with them. Ford and Chrysler already have announced similar buyout offers.

Despite the epic size of its losses, GM retained its title as the world’s largest automaker in 2007, but only slightly, selling just 3,000 more vehicles than Toyota Motor Corp.

GM sold a total of 9,369,524 vehicles worldwide, up 3 percent from the previous year.

This article is based in part on wire service reports.

GM’S BUYOUT OFFER

General Motors Corp. is offering buyouts to 74,000 U.S. hourly workers represented by the United Auto Workers. Here are some details.

•Retirement-eligible employees (30 years or more) will be offered $45,000 for production workers and $62,500 for skilled workers to retire with full pension and benefits. Employees can take the money in a lump-sum payment, have it paid out over time in monthly installments or roll it directly into a retirement account or 401(k).

•Workers close to retirement (between 26 and 29 years) can take a leave with reduced pay until they reach 30 years, when they will be eligible for regular pension and health benefits.

•Employees who are at least 50 with 10 years at the company can retire early with accumulated pension and health benefits.

•Workers with 10 or more years of service are eligible for a one-time payment of $140,000 to leave the company with no pension or health benefits. People with less than 10 years of service are eligible for a $70,000 payment.

Source: Associated Press


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