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Last Updated: Wednesday, 20 July 2005, 22:25 GMT 23:25 UK
US losses drive GM into the red
Window sticker announcing discount at US car dealership
GM's discount spree may have put its profits at risk
Losses of more than $1bn at General Motors'(GM) North American unit have left the carmaker in the red once more.

GM unveiled global net losses of $286m (164.4m) for the three months to June - down from profits of $1.38bn during the same time in 2004.

North American losses of $1.19bn wiped out profits in other countries as GM's global market share grew.

It was more bad news for GM which saw its bonds downgraded to junk after its profits fell 40% in the first quarter.

A junk status rating suggests that a company is more likely to default on its debt. Credit rating agencies took the step after GM posted a $1.1bn loss during the first three months of the year - its worst since 1992.

Mixed bag

GM said its automotive operations lost $948m in the second quarter, with a loss in North America alone of $1.19bn.

Our second quarter results reflect a mix of some important pluses and minuses
GM chairman Rick Wagoner

However, GM's results benefited from several one-off gains which delivered $32m over the period , cutting its losses to 51 cents a share instead of 56 cents per share.

"Our second quarter results reflect a mix of some important pluses and minuses," GM chairman and chief executive Rick Wagoner said.

"On the positive side, sales were up in all regions and market share increased."

However he admitted the group's US performance had been "disappointing" and work needed to be done to drive down manufacturing and staff costs.

Cost cutting

Last month the group said it would be axing 25,000 US staff - in addition to plans to cut 12,000 workers in Europe - and shut down parts and assembly plants in an effort to save $2.5bn (1.4bn) a year.

GM is also currently in talks with unions in an effort to cut US healthcare costs - the group is the country's largest provider of private healthcare.

"It's obviously put North America in a serious crunch," chief finance officer John Devine said of the benefits.

"Health care relief is a fundamental driver of us being successful going forward."

Meanwhile, the company's decision to offer an "Employee Discount for Everyone" in an effort to boost sales could have taken its toll in its American markets.

The move meant a bumper 41% surge in sales to 558,092 vehicles in June..

However experts warned GM may have sacrificed profit margins to boost its sales and clear out its rising stockpiles.

GM took the step in an effort to increase competition with its Asian rivals such as Toyota and Nissan who have been rapidly eating into the market share of America's home-grown carmakers.

Shares in GM sank $1.47 to $35.36 in early trade on Wall Street.


SEE ALSO:
GM sees record car sales in China
06 Jul 05 |  Business
US carmakers reverse sales slide
01 Jul 05 |  Business
More sales woes for GM and Ford
02 Jun 05 |  Business
GM shares jump on Kerkorian offer
04 May 05 |  Business
GM and Ford downgraded to junk
05 May 05 |  Business


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