Despite Bright Spots, General Motors Posts Big Loss

DETROIT ― General Motors' new Chevrolet Malibu sedan is so popular that dealers can barely keep it in stock.

Even with boosted production, it will likely be April or May before demand is met.

''I hope we're never there,'' Mark LaNeve, GM's sales and marketing chief, joked at the Chicago Auto Show. ''Those are good problems.''

But for every good problem at the world's largest automaker, there are a host of bad ones. GM is being pummeled by the economy, fierce competition, government regulations, and gas prices. Even as it enjoyed near-record sales in 2007, outpacing rival Toyota, it ended the year with a record $38.7 billion loss and announced further buyouts to cut costs.

GM wouldn't say how many of its 74,000 UAW-represented hourly U.S. workers it hopes to shed or how much it expects to spend on the buyouts. But under its new contract with the UAW, it will be able to replace up to 16,000 workers doing non-assembly jobs with new employees who will be paid half the old wage of $28 per hour.

Chief Financial Officer Fritz Henderson said the buyouts would help GM's bottom line as early as this fall, and the company is confident that results will improve in 2008 despite sagging U.S. demand.

For one thing, nearly 60 percent of its sales come from overseas, and GM was profitable in every region outside North America in 2007. Henderson also said GM is expecting U.S. sales to improve in the second half of the year as pent-up demand begins to spill into the market.

''We see more risks than upsides in '08 for the U.S. industry,'' Henderson said. ''But we're not conceding '08, because certainly on a global basis we think we can actually improve from '07.''

''We need to get all the structural costs down,'' Henderson said. ''We need to step on the gas in terms of how we're performing in the market as well.''

New products also are helping to bring more buyers into GM's showrooms. GM bucked the industry trend in January, posting a 3 percent increase in sales when every other major automaker was down. Sales of its Cadillac CTS rose 95 percent in January. LaNeve said GM is scrambling to meet demand for the new Buick Enclave crossover.

The huge annual loss was mostly due to a $39 billion third-quarter charge for unused tax credits. It topped the company's previous annual loss record in 1992, when it lost $23.4 billion because of a change in health care accounting, according to Standard & Poor's Compustat.

GM's results also were dragged down by its 49 percent stake in GMAC Financial Services, which lost $2.3 billion last year because of its ResCap mortgage division. GM attributed a $1.1 billion loss to GMAC.

Morgan Stanley auto analyst Jonathan Steinmetz said GM also was hurt by increased incentive spending to help its new full-size pickups compete with the Toyota Tundra. Pricing competition is expected to intensify this year, when both Ford and Chrysler bring out their own new full-size pickups.

Also on the horizon: New federal regulations that would raise fuel economy standards to an average of 35 miles per gallon by 2020.

''We don't see these headwinds fading going forward,'' Bear Stearns analyst Peter Nesvold said.

Excluding the tax charge and other special items, GM lost $23 million, or 4 cents per share, for the year, compared with a net income of $2.2 billion in 2006 ― easily beating Wall Street's expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents per share.

GM reported $181 billion in revenues for the year, down from $206 billion in 2006.

For the fourth quarter, GM posted a loss of $722 million, or $1.28 per share, compared with a net income of $950 million in the year-ago quarter. Fourth-quarter charges included $622 million to Delphi for its restructuring efforts, and a gain of $1.6 billion because of tax credits related to GM's pension liabilities and the sale of its Allison Transmission unit.

The results were a stark contrast with rival Toyota, which has projected full-year earnings of $14.9 billion for the fiscal year that ends in March. Still, even in that rivalry there was a bit of good news for GM, which sold 3,000 more vehicles than Toyota last year to retain the title of the world's largest automaker by sales.