| General Motors Corp.'s already shaky recovery plan | | | | The tax credit could have been used to offset taxes |
| paved the way to one long bumpy ride. Experts in | | | | on future earnings and will be restored if the |
| the industry said slow sales were boosted by a | | | | automaker posts three consecutive years of |
| collapsing housing market, high gasoline prices and | | | | profitable quarters. GM's Henderson said that the |
| across-the-board uncertainty. The enduring sales | | | | charge is an accounting adjustment and does not |
| doldrums are expected to significantly affect GM's | | | | affect the automaker's cash flow or long-term |
| workers. | | | | prospects for profitability. |
| The Detroit-based automaker said that it would take | | | | "We simply aren't inclined to look through the root |
| a $38.6 billion hit for a tax-related accounting charge | | | | cause as just 'noncash, nonrecurring' items," Bear |
| that was not the biggest problem in the company's | | | | Sterns analyst Peter Nesvold said in a research note. |
| third-quarter earnings report Thursday. | | | | "As we noted last week, fundamental pressures |
| GM lost $1.6 billion in the three months ending Sept. | | | | appear to be coming on even faster and stronger |
| 30, excluding special items and one-time charges. As | | | | than we thought when we downgraded GM shares," |
| a result, a sudden end to a series of profitable | | | | three weeks ago. |
| quarters occurred. To stress, it has wiped away gains | | | | Overall, GM's quarterly results were far worse than |
| made in the first half of this year. | | | | Wall Street predicted. The news cast doubt over the |
| Analysts said more tough years are likely ahead. The | | | | automaker's recovery plan which, in 2006, has |
| American auto industry's sales slump of this year is | | | | delivered three consecutive profitable quarters, a |
| expected to carry on if not worsen, well into next | | | | landmark cost-cutting labor deal with the United Auto |
| year, they noted. Commodity prices persist to hike | | | | Workers, stable U.S. market share and a string of |
| beyond expectations. Unstable gasoline prices are | | | | product successes. |
| again making American shoppers jittery. And the U.S. | | | | Henderson acknowledged that economic conditions |
| housing market crisis, which cost GM $757 million in | | | | had worsened beyond the automaker's expectations |
| the third quarter through its partial ownership of the | | | | going into the year. "We certainly didn't foresee a |
| GMAC financial unit, is showing no signs of letting up, | | | | 16-million market," Henderson said. "We certainly didn't |
| The Detroit News Reported. | | | | foresee the housing problems. We have to base the |
| "We do have concerns over near-term economic | | | | business on the reality of today." |
| conditions," said GM Chief Financial Officer Fritz | | | | To battle auto industry's crisis, GM should be as |
| Henderson. "The overall pace of economic activity is | | | | efficient and flexible as Monroe shocks. And the |
| certainly below our expectations." | | | | company has to find a way out of the bumpy track. |
| Altogether, the automaker posted a record $39 billion | | | | "We continue to implement the key elements of our |
| third quarter net loss, which included the $38.6 billion | | | | North America turnaround strategy, and these |
| charge related to future tax benefits. According to | | | | initiatives are driving steady improvement in our |
| Bloomberg News, the loss is the worst in GM's | | | | financial results, despite challenging North America |
| history and ranks fourth on the list of worst | | | | market conditions," concluded GM Chairman Rick |
| quarterly performances since 1990 for members of | | | | Wagoner. |
| the Standard & Poor's 500 Index. | | | | |