GM REPORTS 2005 FINANCIAL RESULTS
General Motors announced losses (net of special items) of $3.4
billion for calendar year 2005 and $1.2 billion in the year's final
quarter, capping one of the worst years in the automaker's history.
GMAC, General Motors' financing arm, once again, showed strong
results with a $2.8 billion profit for the year and $614 million
in the fourth quarter. Both numbers were slightly below 2004's $2.9
billion and $683 million, respectively. GM and GMAC each ended the
year with $20 billion of cash, marketable securities and readily-available
assets providing much needed liquidity as GM proceeds with its turnaround
plan.
In a call with securities analysts, GM management indicated that
it fully recognized the need to change the company's direction and
believes the turnaround plan unveiled earlier in January will be
successful.
Breathing room
GM has only $1.5 billion in term debt coming due through 2007,
giving it some breathing room through the plan's initial implementation.
Among other points: 2006 will see 30% of GM's models replaced by
updated versions. The company also plans to introduce a simpler
pricing structure that is more in tune with what customers actually
pay.
GMAC's continued profitability partially resulted from lower bad
debt expenses and improved used vehicle prices on terminated leases.
GMAC has more investments coming due in the next few years than
debt maturing. No timetable was given for a possible sale of GMAC,
although General Motors indicated it has contingency plans should
such a sale not take place.
While automobile financing generated $1 billion in profits for
GMAC in 2005, results were lower than the prior year by $476 million.
In contrast, GMAC's mortgage business earned $1.35 billion, up from
2004's $1.1 billion.
GMAC also has $50 billion of unutilized bank lines and financing
capacity available in addition to its cash on hand, should such
resources be needed.
In summary, GM has sustained large financial losses during the
recently concluded 2005 calendar year. Management has significant
liquidity to fund the initial stages of its turnaround plan and
hopes 2006 will mark the beginning of a new era.
With the introduction of new products and an ambitious agenda of
cost cutting, bondholders will be anxiously watching for progress
in the coming months.
1/27/06
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