GM Reports $2-Billion Loss in Third Quarter : Autos: A ‘big bang’ restructuring to make the company more profitable is applauded by analysts.
General Motors Corp. today reported a $2-billion loss for the third quarter, including a onetime charge of $2.1 billion for closing four assembly plants and related expenses.
The restructuring move was applauded by industry analysts, who said it was the needed “big bang” to make the world’s biggest auto maker more profitable.
They had expected the charge to total anywhere from $700 million to $2.5 billion.
The loss amounts to $3.54 per common share. GM had earned $516.9 million, or 72 cents a share, in the year-earlier July-September quarter.
Without the charge, GM’s earnings for the latest period stood at $109 million, down 78.9% from earnings a year earlier.
GM’s third-quarter revenue rose 6.9% to $30.8 billion from $28.8 billion last year.
The $2.1-billion charge includes costs associated with the formal shutting down of four assembly plants that were idled during the last three years. Those car plants are near Kansas City, Mo.; Framingham, Mass.; Pontiac, Mich., and Atlanta.
The company said the charge also contemplates the closing or consolidating of other plants and warehouses during the next three years. The company previously had announced that it planned to idle truck assembly plants in Scarborough, Canada; Lordstown, Ohio, and Pontiac, Mich.
“The restructuring is a major element in GM’s long-term strategic plan to improve the competitiveness and profitability of its North American operations,” GM Chairman Robert Stempel said in a statement.
Including the charge, GM said it lost $368.7 million, or $1.20 a share, in the first nine months of the year, compared to a profit of $3.52 billion, or $5.32 a share, in the first nine months of 1989.
Revenues for the January-September period were $94.8 billion this year, down 0.8% from $95.6 billion a year ago.
Wall Street analysts said it was inevitable that GM would write off the facilities after it reached a new labor agreement with the United Auto Workers in September. They said they saw the closure decision as an example of the “housecleaning” GM needs to do to cut costs and improve its competitiveness.
Shearson Lehman Bros.’ Joseph Phillippi, who attended an analysts’ meeting in New York with GM officials, said the charge was big enough to turn the auto maker around. “It’s enough,” he said. “You’ve got a long-term positive and a short-term negative.”
He called the restructuring a major initiative that Wall Street had long been pushing for. “This is the big bang that we have been arguing for,” he said.
