Interest Rate Roundup

Friday, August 01, 2008

First, the downgrade -- Then the awful earnings

Yesterday, S&P downgraded the auto makers. This morning, General Motors stepped up to the podium and explained just how bad things are in the auto business. The company lost $15.5 billion in the second quarter, or $27.33 per share. That was a huge swing from $891 million in profit, or $1.56 a share, in the year-earlier period. Even if you exclude charges for an attrition program and a charge tied to its relationship with the parts maker Delphi, you get a loss of $6.3 billion, or $11.21 per share. Analysts had expected a loss of only $2.40 per share.

The worst results, not surprisingly, were in North America. It lost $9.3 billion here. The company made a small profit in Europe and a much larger profit of $445 million in its Latin America-Africa-Middle East operations. More details are available here.

Incidentally, data on July auto sales are due out later today. Economists polled by Bloomberg are expecting an annualized sales rate of 13.6 million vehicles, unchanged from June. The June sales rate was the lowest since 1993.


  • I am not surprised that GM lost money. Even though GM is in one kind of industry and the oil companies are in another, I wonder how much GM tied its fortunes to the oil companies. GM built cars that would need the gas which helped the oil companies. If GM had built the electric cars that would have hurt oil companies unless the oil companies put an electrical outlet for recharging at the service stations.
    GM problems are of its own making for not being forward thinking enough. I would think GM track trends, track fuel ( considering the oil embargo of the 70's), and track economic data.

    Even though GM got most of its profit from SUVs and trucks, why didnt GM continue to build smaller cars and trucks? Yes, GM was building them but then the GM decided to trash some as they were not selling as well not a good profit margin. So what does GM have now??

    GM could sell those trucks and SUVs to the emerging markets,ie China and India. It would be hypocritical however but its called survival.

    I do think even if gas prices are up, if USA had those "outsourced" jobs which were good paying jobs, GM fortunes would be different.

    By Anonymous Julia, at August 1, 2008 at 11:14 AM  

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