GM reports $38.7 billion loss in ‘07

Troubled by sliding U.S. sales and the sub-prime lending crunch, General Motors Corp. said today it lost $38.7 billion in 2007, a record for any automaker, after a weak fourth quarter. The company announced a new round of buyouts to cut costs.

The massive yearly loss was foreshadowed in November, when GM announced a $39-billion loss for the third quarter, largely due to a write-down of tax credits. In 2006, the automaker lost $1.9 billion.

In 2007, the Detroit giant managed to maintain – by a thread – its title as the world’s largest seller of automobiles, even as it saw its sales in the U.S. slip by 5.9%. For the fourth quarter, GM posted a net loss of $722 million, or $1.28 per share, compared with net income of $950 million, or $1.68 per share, a year earlier.

The decline in U.S. sales, combined with huge mortgage-related losses from its 49% stake in lender GMAC, swamped some good news: increasing international sales and overall rising revenue. Fourth-quarter revenue for GM was up 7%, to $46.7 billion, and for the year it was $178 billion, up $7 billion from 2006.

“We’re pleased with the positive improvement trend in our automotive results, especially given the challenging conditions in important markets,” GM Chairman and Chief Executive Rick Wagoner said. “But we have more work to do to achieve acceptable profitability and positive cash flow.”

To cut costs this year, the company will offer payments of as much as $62,500 for employees who leave their positions and $140,000 for those who agree to surrender their future retirement benefits. Under terms of the new United Auto Worker contract reached last fall, GM can replace departing workers with significantly lower-priced laborers.

After previous rounds of buyouts, the company still has 74,000 UAW employees in the U.S.

Perhaps less easy to address head-on is GM’s exposure to the nation’s growing mortgage woes. Lender GMAC, which is 49% owned by GM, reported a $724-million loss for the fourth quarter, chalking up the loss to its troubled ResCap mortgage lending division. GM booked a $394-million pretax loss on the quarter from its piece of GMAC; on the year, GM lost $872 million from GMAC exposure.

Moreover, there is growing sentiment that declines in the U.S. auto market, by far GM’s most important territory, are in part attributable to the mortgage mess, as consumers find it increasingly difficult to make automobile purchases. Overall industry sales in the U.S. last year declined by 2.5% to 16.1 million cars and light trucks, and even the most optimistic forecasters expect 2008 sales to slip further.

In the face of a tough home market, GM has significant reason to feel confident about its overseas sales, however. In Latin America, Africa and the Middle East, GM made $424 million in the fourth quarter, and in Asia, it earned $72 million. Indeed, worldwide sales for GM increased 3% in 2007, and for the third consecutive year, the majority of its sales were in markets other than the U.S.

ken.bensinger@latimes.com