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GM revises 2005 loss by $2 bn

General Motors Corp. revised its loss for 2005 to $10.6 billion, $2 billion more than it reported in January.

india Updated: Mar 20, 2006 16:26 IST

General Motors Corp. revised its loss for 2005 to $10.6 billion (euro 8.78 billion) -- $2 billion (euro 1.66 billion) more than it reported in January -- citing higher costs it anticipates for its broad restructuring and the bankruptcy reorganization of its subsidiary Delphi Corp.

GM also said late on Thursday that it will recognize a previously reported goodwill impairment charge of $439 million (euro 363.74 million) at its finance arm, General Motors Acceptance Corp. GM, the world's largest auto maker, said it expects to increase the charge for its exposure relating to Delphi's Chapter 11 bankruptcy protection filing to $3.6 billion (euro 2.98 billion) from the previous estimate of $2.3 billion (euro 1.91 billion). Additionally, GM will boost its North American restructuring charge to $1.7 billion (euro 1.41 billion) from the previously reported $1.3 billion (euro 1.08 billion) to cover higher expected costs for plants the company aims to close.

The previous charge included cash payments that would be made to affected employees during the current labour agreement, while the revised charge considers GM's estimate of costs it expects to pay after the contract expires in September 2007.

The change "reflects developments in the discussions with Delphi" and the United Auto Workers union on a comprehensive agreement, the company said in a statement.

"The revised Delphi charge is based on the facts and circumstances as they exist today," the company said. GM spokesman Jerry Dubrowski said the company increased the charge by $1.3 billion (euro 1.08 billion) after it "refined the range" of its potential liability for Delphi workers' compensation. "We've got better information" than was available when Delphi filed for bankruptcy October 8, he said.

The goodwill impairment charge relates mainly to GMAC's commercial finance operating segment. Previously, GM reported but did not recognize these charges in its 2005 financial statements because the goodwill was deemed recoverable. GM decided to recognize the $439 million (euro 363.74 million) charge for the fourth quarter of 2005 after an internal review of accounting standards and consultation with its outside auditors.

The changes involve bookkeeping, not GM's embattled manufacturing operations. "These are accounting issues," Dubrowski said. The 2005 loss translates to $18.69 a share. Previously, the world's largest automaker said it lost $8.6 billion (euro 7.13 billion), or $15.13 a share, last year.

GM sold 9.2 million vehicles worldwide in 2005, the second-largest volume in the company's history. North American losses wiped out sales gains in Europe, Asia, Latin America, Africa and the Middle East; GM's worldwide market share slipped to 14.2 percent from 14.4 percent in 2004.

The automaker's U.S. sales increased 1 percent in the first two months of this year, although GM earlier on Thursday announced a cash incentive program for vehicles that have gone unsold for as long as four months.

Detroit-based GM is attempting to negotiate a revised labor agreement with Delphi and the UAW to help Delphi's hourly workers. The Troy-based supplier, which GM spun off in 1999, has asked the UAW and other unions to agree to pay cuts of more than 60 percent for its 34,000 unionized hourly workers. The unions have refused. GM has stepped into the fray because it relies heavily on Delphi for parts and says it could be contractually liable for up to $12 billion (euro9.94 billion) in benefits promised to Delphi workers. Delphi is threatening to ask a bankruptcy court judge to cancel its labor contracts on March 31 if it hasn't reached a deal to cut its labor costs. If the judge cancels Delphi's contracts, the UAW has said it will strike.

Another Delphi union, the International Union of Electronic Workers-Communications Workers of America, already has voted to authorize a strike.
GM said it will delay filing its 2005 annual report, but still expects to do so this month.

GM shares gained 3.4 percent, or 72 cents, to close at $22.22 Thursday on the New York Stock Exchange, before it released news of the restatement.

First Published: Mar 20, 2006 16:26 IST