General Motors Corp. will delay its fourth-quarter and 2006 earnings reports while the automaker restates earnings dating back to 2002, the company announced Thursday.
The world's largest automaker also said it expects to post “significant” improvements in net results from last year, including a profitable fourth quarter with record revenue.
GM, which has restated results in seven of its last eight quarters, said the changes are due primarily to tax accounting adjustments and “could be material.”
GM's earnings announcement was originally scheduled for Tuesday; now the automaker plans to give an update the week of Feb. 5 and expects to file an annual report with the Securities and Exchange Commission by the March 1 due date.
While GM's indication of improved results for the fourth quarter is likely to reassure investors that the automaker is on a recovery track, its continuing accounting problems are bound to provoke concern.
Some of the past restatements appear to be technical in nature, though the automaker is the subject of a half-dozen investigations by the SEC.
“We continue to be vigilant in looking at our accounting,” said Fritz Henderson, GM's chief financial officer. “On the other hand, the fact that we have discovered errors tells us we have a lot more to go.”
Last year, GM reported a $10.6 billion loss for 2005 — after restating the result it issued previously.
That shortfall was dwarfed Thursday by Ford Motor Co.'s announcement that it lost $12.7 billion in 2006 — the biggest annual loss in its history.
Of Detroit's automakers, struggling against intense competition from Asian rivals in their home market, GM is furthest along in its recovery program, and investors are watching its progress closely.
Analysts have been expecting strong results from GM for 2006, a year in which the automaker pared its work force, cut production costs and scaled back less profitable businesses, such as sales to rental car companies.
Another factor in the earnings holdup is GMAC. GM's former finance arm was not able to supply information on time that GM needed for its fourth-quarter report. GM sold 51 percent of GMAC on Nov. 30 as part of an effort to raise cash.
GM's accounting woes have been embarrassing to a company that has long prided itself on its impeccable recordkeeping. The company appointed a former AT&T controller and chief accounting officer, Nick Cyprus, as its top accountant on Dec. 1, in an effort to improve its bookkeeping in the face of a number of federal investigations.
The delay is more a “nuisance” than anything else, said David Healy, an analyst with Burnham Investment Research.
“I don't think it's going to have any affect on cash,” he said. “I was looking for pretty good earnings for the fourth quarter.”
GM expects to be profitable in the 2006 fourth quarter, excluding some special costs, and expects to improve net income significantly over the fourth quarter of 2005, Henderson said. GM has improved its liquidity position, ending the year with around $26.4 billion in cash and equivalents, an increase of about $5.9 billion over year-earlier levels.
GM may sell division
GM has raised billions of dollars in the last two years selling assets. The automaker got $14 billion when it sold GMAC to Cerberus Capital Management LP. It raised $3 billion by selling stakes in Fuji Heavy Industries Ltd., Isuzu Motors Ltd. and Suzuki Motor Corp.
The company confirmed Thursday that it may sell its Allison Transmission division, which makes transmissions for large commercial and military vehicles. The unit employs about 3,400 workers and has seven plants in the Indianapolis area.
Also on Thursday, GM Marketing Chief Mark LaNeve said January sales will likely be down from last year, but only because the automaker dramatically reduced the number of vehicles it sold for use in rental fleets. Retail sales are on pace to meet January 2006 sales, the automaker said.
GM saw its U.S. sales fall 9 percent in 2006. Overall, GM's U.S. market share slipped to a historic low of 24 percent.
GM sold about 650,000 vehicles to rental fleets in 2006, about 75,000 fewer than in 2005. The company plans to cut that number by 100,000 to 120,000 in 2007, LaNeve said.
LaNeve reiterated GM's goal of selling cars at a higher price even at the risk of losing market share.
“We're committed to the strategy,” he said. “We believe it's working for us.”
