BMW sneezes but General Motors catches cold
The gloom surrounding the motor industry deepened on Friday when General Motors (GM) announced a $15,5-billion loss and BMW issued a profits warning.
GM, the largest carmaker in the United States, announced the third-biggest loss in its history with a slump in North American sales and a series of financial charges. GM specialises in petrol-hungry 4x4s and pickup trucks but those vehicles are out of vogue amid high oil prices, exacerbating a cash crisis at the Detroit-based manufacturer.
Fears over its cash position increased after GM reported a catalogue of hefty losses. The maker of Cadillac, Chevrolet and Vauxhall took $9,1-billion in charges including a $3,3-billion hit from redundancies at US factories and a $2,8-billion exposure to Delphi, its bankrupt former parts manufacturing unit.
Excluding those one-off charges, GM still had losses of $6,3-billion as revenues fell from $46,7-billion to $38,2-billion and dwindling US car sales reached a 15-year low in June. The latest quarterly loss exceeded analysts’ expectations significantly, but is dwarfed by GM’s biggest-yet quarterly deficit of $39-billion last year.
GM is relying on a 15% cut in its North American workforce, new borrowing and asset sales to restore the financial health of a business that consumed $3,6-billion in cash between April and June and is expected to burn through $16-billion this year—when the company celebrates its 100th birthday.
“We are reacting rapidly to the challenges facing the US economy and auto market and we continue to take the aggressive steps necessary to transform our US operations,” said Rick Wagoner, GM chief executive.
GM blamed a slump in US sales, from $29,7-billion to $19,8-billion, on “shifts in vehicle mix” in the US market, which includes a switch away from petrol-hungry vehicles to smaller, more fuel-efficient cars. It added that strikes at one supplier and at a number of its own factories contributed to the sales decline.
BMW cited high oil and commodity prices, plus a worsening US economy, as the main causes for its earnings revision.
“Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the US dollar, the impact of the international financial crisis and a weaker US economy,” it said.
Pre-tax profits fell 44% to €602-million from April to June, prompting Norbert Reithofer, chief executive, to lower expectations.
BMW has abandoned plans to build the X7, which would have been its largest sports-utility vehicle. Reithofer warned that next year would not see a swift rebound. “We assume that 2009 will be another difficult year full of challenges.”
US market woes have hit even the most consistent performers in the car manufacturing business, with Toyota reducing sales targets recently and Renault and Honda revising guidance. GM, Ford and Chrysler have cut more than 100 000 jobs since 2006.—guardian.co.uk