GM Reports - Is Bankruptcy Near?

GM Reports 1Q Earnings; We Expect Bankruptcy Filing Soon

General Motors Corp. (GM - Analyst Report) posted a reported net loss of $6.0 billion, including special items, or $9.78 per share in the first quarter of 2009. This compares with a reported net loss of $3.3 billion, or $5.80 per share, in the year-ago quarter.

Excluding special items, the company reported an adjusted net loss of $5.9 billion, or $9.66 per share, in the first quarter of 2009 compared to an adjusted net loss of $381 million, or $0.67 per share, in the first quarter of 2008. The reported results for the first quarter of 2009 include special items and charges netting to a loss of $73 million.

The special items include GM's $906 million gain on debt extinguishment and $385 million related to GM's portion of GMAC Financial Services' gain associated with the accounting on its debt extinguishment. These items were offset by charges of $116 million for restructuring, a charge of $822 million related to Saab filing for reorganization, and a charge of $291 million in GM North America (GMNA) related to asset impairments.

Charges of $135 million were recorded for advances made under the Delphi Advance Agreement. GM's revenue for the first quarter of 2009 was $22.4 billion, down 47 percent from $42.4 billion in the year-ago quarter. The drop in revenue was primarily due to GM's production volume decline of 903,000 units, or approximately 40 percent, on a global basis year-over-year.

GM recorded an adjusted automotive EBIT loss of $3.9 billion ($5.2 billion reported EBIT loss) in the first quarter 2009. The loss compares with adjusted automotive EBIT income of $808 million in the first quarter of 2008 (reported EBIT income of $484 million). GM's automotive results in the first quarter of 2009 were driven by a revenue decline in all regions, due in part to a depressed global industry.

In addition, GM's results were impacted by unfavorable foreign currency exchange and mark-to-market commodity hedging versus the year-ago quarter. However, these losses were partially offset by a significant structural cost improvement of $3.1 billion when compared to the first quarter of 2008. GMNA revenue for the first quarter 2009 was $12.3 billion, down 50 percent compared to $24.5 billion in the year-ago period, mainly attributable to the impact of the U.S. recession on consumer spending.

Earnings were affected by substantially lower production volume, down 58 percent year-over-year, due to the depressed industry, lower market share and adjustments to U.S. dealer inventory. GM Europe (GME) sales volume was up in Germany, as were industry sales, which were aided by aggressive government stimulus for the automotive sector.

However, due to sales declines in other countries, GME experienced a 46 percent decline in production volume versus the year-ago quarter, which largely impacted regional earnings. GM sales in China were up 17 percent, driven by strong SAIC-GM-Wuling performance and aggressive government stimulus. GMLAAM production volume dropped 24 percent versus the year-ago quarter, which impacted revenue.

On a standalone basis, GMAC reported a net loss of $675 million for the first quarter 2009, down $86 million from the year-ago quarter. GM realized a reported loss of $500 million for the quarter as a result of its equity interest in GMAC. Excluding the impact of the $385 million gain related to GM's portion of GMAC's gain associated with the accounting on its debt extinguishment, GM realized an adjusted net loss of $885 million.

Cash and marketable securities totaled $11.6 billion on March 31, 2009, down from $14.2 billion on December 31, 2008. The change in liquidity reflects negative adjusted operating cash flow of $10.2 billion in the first quarter of 2009, which was partially offset by U.S. TARP funding.

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