GoFuckYourself.com - Adult Webmaster Forum - G.M. Lost $1.1 Billion in First Quarter (Worldcom/Enron Anyone?)

- General Motors reported a $1.1 billion first-quarter loss on Tuesday, its worst quarterly performance since 1992, citing a stark reversal in its North American operations.

The company said it was no longer certain enough of its outlook to provide earnings guidance for the year, backing away from the bleak revisions it made last month.

G.M. also appeared to be inching toward a confrontation with the United Automobile Workers union over health care costs, which are expected to approach $6 billion this year. In explaining why it was not providing guidance, G.M. cited "uncertainty affecting key elements of our financial forecast, such as resolution of the health care cost crisis."

To several analysts, that appeared to be a message that G.M. would continue to seek concessions on health care from its unions. Last week, union leaders said they would not agree to sharp cuts in health care benefits, though they did leave ground for modest concessions.

Steps that are only modest may not satisfy G.M.'s executives. Asked whether G.M. was pressing for more, John M. Devine, the chief financial officer, said in an interview, "we don't negotiate in the press."

"All we're saying is this is a serious issue for us," Mr. Devine said. "The combination of lower volumes and increasing health care costs has put our North American business in a vise."

Mr. Devine also said that for the first time since 2001, G.M. might withdraw money from a $20 billion reserve set aside for retiree health care expenses as one way of paying for rising health costs. The reserve, which was established in the late 1990's, does not need to be repaid.

Union officials had no comment Tuesday.

But some analysts said that the company's emphasis on rising health care costs did not explain the vanishing earnings projections, which are driven by a more fundamental problem: fewer Americans are buying G.M. cars and trucks.

"We continue to focus on G.M.'s market share and product," said Robert Hinchliffe, an analyst at UBS, in a note to investors Tuesday. He added that, while "G.M. cites its health care cost crisis as a major source of uncertainty," he was not clear how it was that health care cost projections could have changed so unpredictably this year.

G.M.'s loss was in line with its profit warning of March 16 that led to a shake-up of its North American management and sent G.M. shares to a 12-year low last week. Tuesday's report further concerned analysts because of the lack of earnings guidance and the negative cash flow of $3.5 billion in the quarter, leaving about $20 billion on its automotive balance sheet.

"That's not something we can do on a regular basis," Mr. Devine said of the company's cash exodus.

After falling sharply early in the day, G.M. shares recovered to close down 10 cents, at $26.09.

The $1.1 billion net loss, or $1.95 a share, was in contrast to a profit of $1.21 billion, or $2.12 a share, in the first quarter of 2004. Special items included charges for revamping the troubled European operations and accelerated retirement packages offered to American white-collar workers. Excluding those, the company had operating losses of $839 million, or $1.48 a share, in line with Wall Street estimates.

Those estimates have been dropping after G.M.'s warning in March that 2005 operating earnings would be $1 to $2 a share, down from an estimate of $4 to $5. G.M. also said then that its operations would eat up $2 billion in cash instead of generating $2 billion, as previously forecast.

But on Tuesday, with G.M. already having cash outflows of $3.5 billion, the company said it was not ready to provide new guidance.

Revenue fell 4.3 percent, to $45.77 billion in the quarter.

"G.M.'s decision to suspend guidance is an additional bad piece of news for the stock," wrote John Casesa, an analyst at Merrill Lynch, in a note to investors. He added that the statements about health care suggested "management is ratcheting up pressure on the U.A.W." to renegotiate its contract before it expires in 2007. Union leaders appeared to rule that out last week.

Health care costs are a substantial burden because G.M. provides coverage for 1.1 million Americans, including workers, retirees and their families. G.M. autoworkers do not pay deductibles or monthly premiums, though they do have co-payments for office visits and pharmaceuticals.

http://www.nytimes.com/2005/04/20/bu...l3/20auto.html