DETROIT: The fiscal fragility of General Motors, the globe's top-selling carmaker (until last month when it was overtaken by Toyota), was highlighted Friday by a 90% plunge in first quarter net income to $62 million (€45.63m; £31.1m), versus $602 million a year earlier.
That GM, the globe's fifth largest corporation by sales [Forbes magazine, 29-Mar-07], remains in the black at all is solely due to the hitherto hefty profits accruing from a 49% retained stake in its former money-lending unit GMAC Financial Services.
But GMAC posted an eye-watering Q1 loss, triggered by increasing defaults in the subprime (high-risk) home loans market - a fact that will not be lost on those who sense early tremors of a seismic shift in the US economy.
The automaker's first-quarter net earnings by region, expressed year-on-year in $ millions (Q1 2006 figures in parentheses) were:
- North America $85 deficit ($251 deficit)
- Europe $42 ($131 deficit)
- Asia/Pacific $150 ($97)
- Latin America $201 ($67)
"That is first and foremost in our minds. As we go into bargaining [with the United Auto Workers union], we've had a high sense of urgency, we continue to have a high sense of urgency."
That sense of urgency is echoed in Wall Street. Says Standard & Poor's auto analyst Efraim Levy: "These are going to be historic negotiations. There is a need for unprecedented concessions because of the dire situation the Big Three are in right now."
Data sourced from Wall Street Journal Online. additional content by WARC staff