General Motors, which is wrestling with Toyota to retain its status as the world’s biggest car manufacturer, is set to get a lot smaller. The group is offering early retirement to 74,000 of its 110,000 US staff. The move came as GM reported a $38.7bn loss for 2007, a record for the motor industry.
Much of this was expected, with $38.3bn stemming from a deferred tax charge. The shock was the $400m fall in US sales in the fourth quarter, much worse than Wall Street had expected. Soaring petrol prices have seen a shift away from the pick-ups and sports utility vehicles that account for half GM’s output, said Jorn Madslien for the BBC, at a time when US consumers are wilting. Commenting on GM’s loss in the context of the US economy, even a White House spokesman said it was “significant”, noted Russell Hotten in The Daily Telegraph.
It’s a different story abroad. GM made 61% of sales outside the US last year, selling 9.4 million vehicles, the second-best showing in its 100-year history. But efforts to restructure its vast pension and healthcare costs won’t show benefits until 2010 or 2011.
In the meantime, GM will struggle to turn a profit this year, said Bradley Rubin at BNP Paribas, especially with the US facing, or already in, recession. The group will also face another big write down: its job cuts programme could cost as much as $4.6bn. As Hotten put it, this “turnaround has a long way to go”.
GM: 12m change: –25.5%