More Road Bumps for GM

For Delphi, where GM is locked in negotiations with labor unions to negotiate a restructuring and prevent a strike, the automaker raised its liabilities related to the auto-parts supplier's bankruptcy. The charge now comes to $3.6 billion, up from the previous estimate of $2.3 billion.

GM's liabilities related to Delphi's bankruptcy could run as high as $12 billion, but the automaker has said it expects it to come in far lower. Delphi, once a GM subsidiary, remains its chief parts supplier. In its restructuring, Delphi is attempting to lower its labor and legacy costs, but the United Auto Workers union has opposed its proposals. If negotiations fail, a resulting labor strike could cripple GM's production lines and leave it in a debilitating credit crunch.

"The announcement about added charges related to Delphi could actually be viewed as a minor positive in the context of the ongoing negotiations," Novak says. "It shows the parties have been talking. They've sharpened their pencils, and they now have a little more clarity about what it's going to take to resolve this thing. So, it could be a sign of progress."

Meanwhile, GM's accounting changes come in the midst of an ongoing probe of its financials by federal regulators. In addition to the latest charges added to its 2005 results, GM has faced questions about how it accounts for its pension obligations and other liabilities.

When it files its annual report later this month, GM will include restated results for 2000 through 2004 after erroneously recording certain payments and credits from suppliers. It will also lower its previously reported 2005 first-quarter net income by $149 million due to accounting errors related to vehicles being leased to rental car companies.

"Usually, when a company has accounting issues like this, it's just the tip of the iceberg, but we really don't know if this will lead to any more issues down the line in GM's case," Tynan says. "There's still a lot of unraveling that could take place as an offshoot of yesterday's news. In the end, it's all indicative of the major challenges facing the company."

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