Skip to main content

Updated from 7:48 a.m. EDT

General Motors

(GM) - Get General Motors Company Report

reported a $6 billion loss, a 47% revenue shortfall and a 3.8% drop in North American market share, and yet it is remarkably easy to spot the positive signs in its first-quarter results.

In both China and Germany, the largest countries in Asia and Europe, GM sales rose, even its as sales in both Asia and Europe fell sharply. In China, GM sales rose 17%. In Germany, industry sales rose 14%.

In both cases, improvement was driven by government incentives, of the type President Barack Obama says he is considering for the U.S. China cut taxes on cars with small engines and offers subsidies to car buyers in rural areas. Germany offers $3,150 incentives to buyers who junk clunkers and buy cars that pollute less.

"We've seen this thing work in a real live case study (which) has happened in Germany," said CFO Ray Young on an earnings conference call. "Conceptually, we believe it is important in order to drive demand stimulation in the U.S. market place."

Young noted that GM reduced its cost structure by $3.1 billion during the quarter. "We're going to get our costs structure fixed around here, there's no doubt about it," he said. "But profit is revenue minus cost. To the extent we implement this type of (incentive) program, this is a positive for the U.S. economy. (And) anything to give the U.S. economy a boost, in my opinion, would be very much welcomed."

Scroll to Continue

TheStreet Recommends

In another positive sign, GM's cash burn was less than expected. The number came in at $10.2 billion, below the $13 billion GM projected in mid-February. At the end of the quarter, GM's cash and marketable securities totaled $11.6 billion, down from $14.2 billion on Dec. 31, 2008, as the negative cash flow was partially offset by funding from the Troubled Asset Relief Program.

GM's market share loss is disturbing, but Young discounted it. He said the share reduction reflected the impact of bankruptcy chatter; a weaker product mix, as buyers avoided SUVs and trucks; reduced fleet sales that resulted from production cuts and product shortages in certain markets, including Brazil and Germany.

Regarding bankruptcy talk, Young said survey and anecdotal evidence indicate that "the perceived impact of bankruptcy is having a big impact on our results." He reiterated GM's preference to avoid bankruptcy, but said that if the company can't make a deal with bondholders, it wants to move quickly to restructure in court. "We need to get out of the front page of the newspapers every day," he said.

For the quarter, the loss was $9.78 a share. Analysts surveyed by Thomson Reuters had estimated a loss of $11.05 a share. Revenue fell 47% to $22.4 billion, while analysts had estimated $20.2 billion. In the same period a year earlier, the loss was $3.3 billion, or $5.80 a share.

Excluding special items, the loss was $5.9 billion, or $9.66 a share, compared with $381 million, or 67 cents a share, a year earlier.

GM said global economic pressures and a 21% decline in global auto sales offset the $3.1 billion impact of cost reductions.

The automaker's production fell by 40% or 903,000 vehicles, partially due to inventory cuts. "We took advantage of the first quarter to start right-sizing," Young said. "That's an adjustment that will continue in the second quarter."

Revenue fell in every region, and the company was negatively impacted by unfavorable foreign currency exchange resulting in costs of $1.3 billion and the impact of mark-to-market commodity hedging, resulting in a $1 billion cost.

North American revenue declined 50% to $12.3 billion. In Europe, revenue fell by 46% to $5.3 billion, while market share fell to 8.9% from 9.6%. In Asia, revenue fell 55%, but market share increased to 8% from 6.9%. In Latin America, revenue fell 29% and market share fell to 16.9% from 17.6%.