DETROIT — General Motors Corp. recently reported a record $39 billion quarterly loss after three money-losing years forced the company to write down the value of future tax benefits.
The loss, excluding the tax write-down, was $2.80 a share, more than 12 times analysts' estimates. Mortgage-related losses at GM's partly owned finance unit overwhelmed auto sales that were the highest ever. GM shares fell 5%, giving the Detroit-based automaker a market value of $19.4 billion, about half the size of the third-quarter loss.
GM signaled that it won't generate enough earnings to use the benefits. CEO Rick Wagoner cited concerns about defaults on subprime mortgage loans at GMAC LLC and auto sales in the U.S. and Germany. Slumping U.S. sales in the past half year “feel like the conditions we're going to face,” Wagoner said.
“This all suggests that GM thinks that things are so ugly out there that they can't see the possibility of profitability for many quarters, maybe even years,' Bradley Rubin, an analyst with BNP Paribas in New York, said in an interview.
GM had a net deficit of $757 million related to its 49% holding in GMAC, which posted a $1.6 billion third-quarter loss on Nov. 1 because of mortgage losses at the Residential Capital LLC unit. GM sold the majority stake in GMAC last year to a group led by Cerberus Capital Management LP.
GM's loss of $68.85 per share, the fourth-largest quarterly loss among S&P 500 companies since 1990, widened from a deficit of $147 million, or 26 cents, a year earlier. The non-cash charge of $38.6 billion is related to deferred tax assets in the U.S., Canada, and Germany, the automaker said in a statement.
The results also reflected an after-tax gain of $3.5 billion from the sale of its Allison Transmission unit, $1.6 billion in pension-service costs related to prior labor agreements, and $350 million in charges connected to its bankrupt former partsmaking unit, Delphi Corp.
GM's automotive revenue rose 8.7% to $43.1 billion, a third-quarter record, and automotive operations excluding the tax cost had net income of $122 million. The automotive loss a year earlier was $455 million. Auto losses in North America narrowed.
About $700 million of GM's adjusted loss of $1.6 billion was also related to the tax changes, CFO Fritz Henderson said on a conference call.
“Most of the decision for the write-off is driven by history, the fact that we've had a three-year cumulative loss,' Wagoner said.