General Motors Corp.'s recovery moved another step forward yesterday as it posted a loss of $115 million, or 20 cents a share, in the third quarter, a huge improvement from the loss of $1.7 billion, or $2.94 a share, a year earlier.
Excluding charges related to its recovery plan, GM earned $529 million, or 93 cents a share, almost double the 49 cents a share forecast. It marked the second straight quarter in which charges translated gains into losses for the No. 1 automaker.
"Our turnaround efforts are well under way, reflect significant progress and are having a large impact on the bottom line as evidenced by a $1.6 billion improvement for the quarter," said GM Chairman G. Richard Wagoner Jr.
Fritz Henderson, GM's vice chairman and chief financial officer, wouldn't venture a guess on when GM expects to post a profit clear of charges.
"We need to go through that debate ourselves, but a number of issues remain to be resolved: the successful resolution of Delphi negotiations and closing the GMAC transaction," he said in a conference call with analysts and media.
GM's third-quarter loss of $115 million paled in comparison with losses of $5.8 billion at Ford Motor Co. and $1.5 billion at DaimlerChrysler's Chrysler Group.
"GM looks like the healthiest guy in intensive care, but the results will be even better when Delphi and GMAC are resolved," Jim Hossack, vice president of AutoPacific, said, referring to labor issues at GM's largest supplier and the sale of 51 percent of its financing arm.
After reaching a 14-month high Tuesday, GM stock shed $1.48 to $34.71 yesterday on the New York Stock Exchange.
Henderson said GM is on track to achieve its goal of $9 billion in cost cuts by the end of this year and to cut costs by 25 percent by the end of the decade. But optimism is tempered.
"We didn't get the results we wanted in the quarter," he said. "We aren't at satisfactory profitability, an important step. I'm happy with the fast pace of restructuring and cost-cutting, but we need to execute in the marketplace [with new products] as well."
Catherine Madden, analyst with Global Insight, agreed. "GM is making progress but has to report earnings gains and not losses. And that has to happen as new product comes on."
Henderson said GM looks for the product boost in the fourth quarter and the first quarter of next year, as its redesigned pickup trucks and car-based crossover vehicles enter the market.
And he said negotiations with its major parts supplier Delphi, which GM spun off in 1991 and which is operating under Chapter 11 bankruptcy protection, have progressed. GM, Delphi and the United Auto Workers are talking about wage and benefits reductions. Delphi has asked a federal bankruptcy judge to void its labor contracts.
Henderson revealed that as part of the negotiations, GM has lowered the range of Delphi liability it will assume to a high of $7.5 billion from $12 billion; $6 billion is already set aside.
He also disclosed that GM has agreed to reimburse Delphi for labor expenses it incurs after emerging from bankruptcy by $400 million in 2007 and $100 million annually after that for an undetermined, but brief, period.
GM said its third-quarter revenue totaled a record $48.8 billion, up from $47.1 billion a year earlier. GM attributed much of the improvement to its global automotive operations, where it lost $116 million, $1.5 billion less than last year.
In North America, the company lost $374 million, $1.3 billion less than last year.
GM's market share dropped nearly a full point in the United States, to 25.1 percent this year, from 26 percent last year, mainly to the advantage of Asian competitors.
Jim Mateja writes for the Chicago Tribune.