GM reports largest loss ever, offers buyouts to 74,000 U.S. workers

No buyouts for GM employees in Canada

Last Updated: Tuesday, February 12, 2008 | 4:19 PM ET

The Associated Press

General Motors Corp. reported a $38.7-billion US loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.

The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens.

But chairman and chief executive Rick Wagoner said that the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labour agreement and growing aggressively in Latin America and Asia.

The Detroit-based automaker is offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers.

The buyouts are not being offered to any of the approximately 13,000 GM workers in Canada, company and union officials said.

"Any time the corporation doesn't make money, that affects everybody — we're all working hard to save money and reduce costs and do things more effectively," said GM Canada spokesman Stew Low.

"But as far as working through any buyouts here or anything like that, that's not applicable.… This is a U.S.-only situation."

Canadian Auto Workers president Buzz Hargrove observed that GM in Canada does not have a two-tier wage system, unlike the new UAW deal that pays less to new hires in the U.S.

"The more people they can get out at $28 an hour, they can hire people in at $14," Hargrove said.

"So there's a huge incentive for them to put buyouts on the table. It's a lot cheaper. They don't have that in Canada."

The CAW enters contract talks with GM this summer, and "we're just going to have to wait until bargaining to see where it all ends up," Hargrove said.

Hargrove, who leads Canada's largest private-sector union, was scheduled to have his first meeting with Prime Minister Stephen Harper since January 2006 later Tuesday in Ottawa.

GM wouldn't say how many American workers it hopes to shed, but under its new contract with the UAW it can replace as many as 16,000 workers doing non-assembly jobs with new employees paid half the old wage of $28 US per hour.

Ford Motor Co. and Chrysler LLC already have announced similar buyout offers.

Loss breaks 15-year-old record

The year's loss of $38.7 billion US was largely due to a third-quarter charge related to unused tax credits.

The loss topped GM's previous record in 1992, when the company lost $23.4-billion US because of a change in health-care accounting, according to Standard & Poor's Compustat.

Excluding the tax charge and other special items, GM lost $23 million US, or four cents per share, for the year, compared with a net income of $2.2 billion US in 2006, beating Wall Street's expectations.

Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share.

GM posted a loss of $722 million US, or $1.28 US per share, in the fourth quarter, compared with a net income of $950 million US in the year-ago quarter. Fourth-quarter charges included $622 million US to Delphi Corp., GM's former parts division, for its restructuring efforts.

GM reported $181 billion US in revenues for the year, down from $206 billion US in 2006. Its automotive business saw record automotive revenues of $178 billion US in 2007, up $7 billion US from a year ago thanks to growth in emerging markets and favourable exchange rates.

But GM's North American division continued to struggle, posting a $1.5-billion US loss for the year.

GM's results were also dragged down by its 49 per cent stake in GMAC Financial Services, which lost $2.3 billion US in 2007. GM reported a $1.1-billion US loss attributed to GMAC.

GM barely retained its title as the world's largest automaker in 2007, selling just 3,000 more vehicles than Toyota Motor Corp. GM sold a total of 9,369,524 vehicles worldwide, up three per cent from the year before.