Updated from 9 a.m. EDT
unleashed a torrent of news on Wall Street Monday, reporting a much wider-than-expected third-quarter loss and saying it will explore the sale of its financing unit.
GM, battling with bloated costs and innovative competitors, also trumpeted a deal with the United Auto Workers union that will cut its annual healthcare expense by $1 billion. That news sent the stock up $2.55, or 9.1%, to $30.53.
GM pegged the overall value of the tentative UAW pact, which calls for "reduced GM healthcare coverage on individual hourly retirees," at $15 billion, or 25% of its hourly healthcare liability.
For the third quarter, GM lost $1.6 billion, or $2.89 a share, compared with a profit of $315 million, or 56 cents a share, last year. Excluding an $805 million asset impairment charge and other items, GM earned $1.1 billion, or $1.92 a share, in the quarter. Revenue rose 5% from a year ago to $47.2 billion.
Analysts had been expecting a loss before charges of 81 cents a share in the latest quarter.
The company's biggest drag continues to be North American automotive, where high labor costs and a portfolio of gas-guzzling muscle cars and trucks are squeezing the company as energy prices surge. The unit lost $1.6 billion in the third quarter compared with a loss of $88 million a year ago, while market share slid to 25.6% from 28.5% a year ago.
"Results were adversely affected by lower production volumes, continued increases in health care costs, higher material costs, and a shift in vehicle mix away from full-sized sport utility vehicles," GM noted. It said dealer inventories fell 28% year-over-year to 818,000 units at quarter's end.
Globally, GM's automotive operations' loss widened eightfold to $1.6 billion in the quarter, as profitable results in GM's Asia-Pacific and Latin America/Africa/Mid-East regions were more than offset by losses in North America and Europe. Global market share was 14.6% in the quarter, down from 15.4%.
Despite tightening lending spreads, the company's GMAC financing arm continues to be its saving grace, earning $675 million in the quarter, up from $620 million a year ago. Strong results from mortgage lending more than offset lower financing and insurance profits. Hurricane Katrina cut the division's earnings by $161 million.
Mortgage operations earned a record $408 million in the third quarter of 2005, up from $266 million in the third quarter of 2004. "GMAC's residential mortgage businesses benefited from increased gains on sales of mortgages as well as certain investment securities," it said. "In addition, improved servicing results, net of hedging activities, contributed to the increase in third-quarter earnings."
GM said it is exploring the sale of a controlling interest in GMAC to a strategic partner.
"These potential actions are intended to restore GMAC's investment-grade credit rating and to renew its access to low-cost funding," the company said. "In addition, these actions are designed to preserve and to grow the synergies between GM and GMAC, especially cost-effective auto financing, and sustaining GMAC's diversified earnings growth."
GM reiterated that it will close additional assembly and component plants in an efforts to achieving 100% "or more" of capacity utilization at its plants by 2008. The plan will require 25,000 more job eliminations.
The company noted that its salaried U.S. employees and retirees have been told of changes to their healthcare benefits, including higher medical co- pays. No GM employee or executive is receiving a raise or bonus this year.
"With all the cost-reduction initiatives in place, GM expects to reduce its structural cost by a $5 billion run rate by the end of 2006. The 2006 full- year impact depends on timing of approvals of the health-care changes," it said.