General Motors Posts Worst Quarterly Loss in Over a Decade, Abandons Profit Forecast
General Motors reported a record quarterly loss of $1.1 billion, its worst in over a decade, as rising healthcare costs and falling sales weighed on the company's finances. The loss, which amounts to $1.48 a share, was in line with market forecasts, but the company's decision to abandon its profit forecast for the year has raised concerns about its ability to recover from the economic downturn. The company's cash flow has been watched closely, as investors anticipate a downgrade of its credit rating to junk bond status, which could force many funds to sell their holdings.
Key Takeaways:
- General Motors reported a quarterly loss of $1.1 billion, its worst in over a decade.
- The company abandoned its profit forecast for the year due to uncertainty about its healthcare cost crisis and other significant business issues.
- The company's North American car business lost $1.3 billion before one-off costs, with revenue down 12.7 percent to $25.4 billion.
- Group net losses of $1.1 billion in the first quarter compare with net income of $1.2 billion in the same period last year.
- The company's cash flow has been deeply affected by its decision to spend $1.7 billion on job losses in Europe and a payment to Fiat to settle a dispute.
- The bonds trade more cheaply than the average for BB-rated junk bonds.
- GM's shares fell slightly to $26.09.
- Analysts at Standard & Poor's have expressed concerns about the company's profit forecast, but do not expect the rating to be affected.
Statistics:
- Quarterly loss: $1.1 billion
- Loss per share: $1.48
- Revenue: $25.4 billion
- Revenue decline: 12.7%
- European job losses: $1 billion
- Payment to Fiat: $700 million
- Bond trading cost: 7 percentage points over government debt
- S&P credit rating: one notch above junk bond status with a negative outlook
Sources:
- Financial Times, March 17, 2005, page 14
- Financial Times, March 17, 2005, page 16
- www.ft.com/autos (latest news)