General Motors reported its second quarter earnings this morning, and the news was predictably grim. The General lost $15.5B in the quarter, as the Detroit Automaker continues to struggle with brutal market conditions and the costs associated with strikes and downsizing. Among the losses is a $4B hit from automotive operations, as stymied truck sales resulted in an 18% drop in revenue to $38B. GM's credit arm lost another $2.5B from high loan default rates and huge losses from truck and SUV lease residuals.
Another $9.1B came from one-time charges associated with GM's massive restructuring and the American Axle strike. Among the charges was a $3.3B write-down to pay for buyouts to the 19,000 UAW members that left by July. Overall, GM lost a staggering $27.33 per share in the quarter, which is even more amazing considering the General's stock is trading at about $10 per share. Among the actions GM took this week to help stem its bleeding balance sheet was ending all leasing in Canada, raising lease costs here in the States, and the announcement of 5,000 white-collar job cuts.
We're no industry analysts and we don't have any insights into the General's balance sheet, but a $15.5B Q2 loss and four straight quarters of red ink doesn't sound good at all. New fuel efficient products like the Chevy Cruze and Volt can't come soon enough, though it will be an even bigger challenge trying to make money off these small and ultra-fuel efficient cars.
Following up Nissan's first set of U.S. buyout packages offered a year ago, employees at both the Smyrna and Decherd powertrain plants in Tennessee will be offered a lump sum payout along with medical and car purchase benefits to leave. Last year, the buyouts attracted 775 workers, though the payout at that time was just $45k plus an additional $500 for each year of service. This time, the lump sum starts at a heady $100k. Not surprisingly, Nissan is expecting more people to take the package this year than last. In fact, Nissan spokesman Fred Standish says that "market realities" mean that the Japanese automaker needs to shed some 1,200 excess employees. The packages are open for a three-year window, with the greatest sum being offered for workers who accept the packages this year. The Smyrna plant assembles the Frontier pickup, Altima, Xterra, Maxima and Pathfinder. Our bet is that the sedans will continue production as normal with the trucks and SUVs accounting for the lowered head count.
Ford is hoping to continue the reduction of both the number of vehicles the automaker will produce and, correspondingly, its hourly blue-collar workforce. In order to make good with the UAW, the same buyout packages available last year are being extended to these unionized workers. The packages have not changed since they were offered to Ford employees in Kentucky in June of 2007. These latest buyout announcements involve workers from plants in either Michigan or Ohio, a further blow to the already weakened economies in these two auto-heavy states.
Earlier this year, Ford said it was hoping for another 9,000 hourly workers to take buyouts. Between 2006 and 2007, a total of 33,600 union workers accepted either buyout packages or early retirement packages, a huge percentage of Ford's total employees. At this rate, we wonder how many UAW workers Ford will have left after it's all said and done.
More than one-fourth of GM's 74,000 hourly employees are going to grab the loot and skedaddle. Earlier this year, UAW President Ron Gettlefinger estimated that 15,000 would put their hands out, but another couple thousand decided to hop on the General's money train. The workers are expected to finish their employment by July 1. GM's most recent deal with the UAW means it can replace those folks with lower wage workers and save itself a bundle on payroll. And that will make the job of saving itself that much easier.
General Motors announced today that approximately 19,000 hourly employees have opted to leave the automaker's ranks in exchange for a buyout offer and retirement incentives. The offer was extended to 74,000 UAW workers in an attempt to swap out highly paid long-termers with lower-paid new employees as the General realigns its financial situation. Workers have had months to make the decision, but GM is giving them another week to rethink their choice. Employees that have made the final decision will leave no later than July 1, 2008. The effect of nearly 19,000 hourly employees taking buyouts apparently wasn't enough to right the S.S. General Motors as the massive automaker just announced that a new restructuring plan with more buyouts and layoffs is on its way.
Ford has a dealer development program aimed at helping those who lack up-front capital open a dealership. The dealer pays Ford back with profits from the business, and slowly buys out Ford's stake. There are 81 dealers in the program now, 62 of which are minorities who the program was originally intended to aid, and Ford has offered to buy all of them out by returning the dealer's full investment.
Some dealers say Ford is trying to shed the minority-owned franchises, and Ford denies the accusation, saying that it is simply trying to let struggling dealers exit the business without losing everything, and that it wants to get its dealer organization in line with its economic reality. To be fair, the offer has been extended to every dealer in the program, some of which even are profitable. As well, for dealers who rely solely on the dealership for income, there's a chance Ford will give them an additional $100,000.
No matter what's the real impetus, at least Ford is trying to make an offer that isn't pennies on the dollar. Said Hispanic dealers' alliance chairman and dealership owner Fernando Varela, "In tough market conditions (when) you're not making any money, they're offering you something. Other manufacturers let you walk off, and you lose your investment." Ford has given dealers until April 1 to decide on the buyout; dealers are asking to have until June 1 to make the decision.
Ford is making significant strides to turn its North American operations around. In 2006, it was able to cut almost 34,000 workers from its payroll after one round of buyouts and is looking to cut even more of its workforce this year through another payoff program that's being offered to 54,000 UAW-represented workers.
While it's mortgaged everything in its arsenal to keep afloat through the tough times, FoMoCo is planning to hand out bonuses this year, as it did last March.
According to the Freep, the bonus plan is sitting on the table in front of Ford's Board of Directors, awaiting approval and it will likely cover some 23,700 salaried and 64,000 hourly workers in North America. Most salaried employees walked home with somewhere between $300 and $800 last year, with higher-ups paid "several thousand dollars to $15,000 or more."
While we understand that keeping moral high in these troubling times is important, with Ford posting a net loss of $2.7 billion last year, it seems that the major "bonus" for workers is that they are still employed at the Blue Oval.
Let's get the hard numbers out of the way. Today General Motors revealed that excluding special items, it posted a net loss of $23 million in 2007. Add in some funky deferred tax asset charge, and the automaker's net loss last year rises to $38.3 billion. Aside from that, we're interested in how GM fared in the business of selling cars and trucks around the world last year. In 2007, the automaker earned $553 million before taxes selling vehicles globally, compared to losing $339 million in 2006. Worldwide vehicles sales increased 3% to 9.4 million vehicles last year, but the North American market was no help, losing $1.5 billion before taxes.
Numbers aside, GM also had some big news today in the form of new buyouts for its entire union workforce that's some 74,000 strong. Similar to the recent round of new buyouts offered by Ford and Chrysler to their union workers, the new arrangement is more generous to workers than what was offered back in 2006. GM hasn't said how many workers it will let go this time, but because of its new contract with the UAW, the automaker will be allowed to replace some of those workers with new hires at a reduced compensation rate of around $14/hour.
Over 2006 and 2007, Ford lost $15.3 billion. Over that same time and in light of those losses, the company also shed 33,600 union workers through buyouts and early retirement. Still working through the uphill part of the turnaround, Ford has announced it wants to eliminate another 8,000 to 9,000 factory jobs through buyouts. If 8,000 workers end up leaving, that's almost 12 percent of Ford's current workforce walking out the door. They'll leave with benefits and a buyout that ranges from $50,000 to $70,000 depending on whether the position is a skilled trade. While it might seem like a lot of money, the point is that with the new labor agreement, Ford can hire new workers -- when the time comes -- for $26 to $31, instead of the $60-per-hour it pays now. The UAW figures the salary change could save Ford $1,000 per car.
Although 8,000 buyouts is Ford's target, the company is willing to accept more workers leaving. The offer has been extended to workers at four shuttered factories, and will be expanded next week to others. Those who don't want buyouts can be transferred to another factory. And if they don't accept the buyout or relocation, then they "will be placed on a 'no-pay, no-benefit leave,'" which sounds a lot less appealing than a 5-figure check.
Ford had a rough 2007, but there were bright spots, among them being news announced today that it managed to trim its fourth quarter losses compared to the same quarter in 2006. The Blue Oval announced today that it lost $429 million, or 20 cents a share, in Q4 2007. Compare that to the $2 billion, or $1.03 a share, it lost during the same quarter the year before, and you can see why sometimes a loss can still be considered a good thing. The company's net loss last quarter was $2.8 billion, or $1.30 a share, which is also a big improvement over the $5.6 billion, or $2.98 a share, loss during Q4 2006.
While operating in the red is never a good thing, the narrowing losses at least show momentum in the right direction, even if the automaker still expects an overall loss in 2008, as well. To further that momentum along, Ford will be cutting more costs in 2008, including offering more buyouts to the 54,000 hourly workers that remain in its employ after over 30,000 workers accepted buyouts in 2006. It didn't say how many additional buyouts would be offered, but Automotive News is reporting that it will be around 13,000 workers.
