A $753-Million Quarterly Loss for GM : Autos: The amount is less than expected, but it still underscores the company’s serious financial woes.
As General Motors Corp. awaited a new leader Thursday, its old one reported a narrower than expected loss of $753 million for the third quarter and said that figure and other measures prove the ailing company is getting better.
But the scope of GM’s loss compared to its competitors underscored the woes that led to this week’s boardroom revolt that toppled Chairman and Chief Executive Robert C. Stempel.
In the final financial statement to be put out under his name, Stempel noted that the July-September loss was 28% smaller than the year-earlier outcome, even though GM sold nearly 10% fewer cars and trucks. In the same quarter a year ago, GM lost $1.06 billion.
The report of the huge loss, at the low end of Wall Street forecasts that had ranged as high as $1 billion, sets the stage for Monday’s GM board meeting at which a successor to the 59-year-old Stempel is expected to be named. Additional executive housecleaning may also be ordered.
Stempel resigned Monday under intense pressure from the 11 board members who have never worked for GM, the first such upheaval atop GM since 1920. The board, which has 15 members, was dissatisfied with the pace of GM’s cost-cutting efforts.
Speculation continues to center on John G. Smale, retired chairman of Procter & Gamble and leader of the outside GM directors, as the auto maker’s new chairman. The chief executive’s post, separated from the chairman’s role, would go to GM President and Chief Operating Officer John F. Smith Jr.
However, the Detroit rumor mills have been working overtime this week to fill the vacuum of information about what will happen next at GM, not only in the choice of new leaders but on such issues as whether it will cut the dividend, dismantle the Oldsmobile division or sell off huge chunks of the company.
Published reports have suggested, for example, that General Electric Chairman Jack Welch, onetime Chrysler Vice Chairman Gerald Greenwald and others are possible candidates for top jobs.
GE issued a denial that Welch, said to be a friend of Smale’s, had been approached about a GM post.
“Most of what you read is inaccurate,” GM Director Ann McLaughlin, a former labor secretary, told a Washington audience Wednesday about the rumors.
However, a dividend cut might be a good bet, analysts say. GM could save about $500 million a year by halving its $1.60-a-share payout on common shares. The company was paying $3 a share until 1990, when its current troubles started.
That step, along with recently imposed cuts in health care benefits for white-collar employees, would point to the “equality of sacrifice” demanded by the United Auto Workers union as it weighs GM’s pleas to reopen their national labor agreement and clear the way for sweeping changes on the factory floor.
More than the recession that hit shortly after Stempel took over 27 months ago, GM has been plagued by massive inefficiencies throughout its North American car and truck business. A recent study found that it costs GM nearly $800 more than Ford Motor Co. to build a car.
Such discrepancies help explain why Ford Motor Co. lost just $159 million in the third quarter, despite dismal results in Europe, and Chrysler Corp. posted a surprisingly strong profit of $202 million.
GM’s heavy losses were recorded despite strong profits in Europe and in its big aerospace, computer and finance subsidiaries.
Stempel and Smith said GM is “ahead of schedule” in cutting 20,000 salaried jobs by the end of 1993 and that other cost-cutting steps are being accelerated.
But there remains little or no evidence of a turnaround in the U.S. auto market. Ford expects to lose money in the current quarter, and the GM executives concur that “the rest of the year could remain difficult if the economy doesn’t show signs of a more rapid improvement.”
Analysts agreed that GM’s latest results showed some success in its efforts--deemed unsatisfactory by the board of directors--to slash the highest costs in the industry and streamline operations.
“It should be a surprise when anyone manages to go through three-quarters of a billion dollars in three months,” said David Healy at S. G. Warburg & Co. “But in the silver lining department, they did shrink their loss despite a decline in volume.”
GM’s third-quarter dollar sales, most of which come from the car and truck business, edged up 1.7% to $29.4 billion despite a worldwide decline of more than 5% in the number of vehicles it sold.
Analysts described that as another positive sign, reflecting an effort to reduce dependence on sales to rental-car fleets in favor of more profitable sales to retail customers.
