GM Offers Workers Buyouts
DETROIT (Reuters) - General Motors Corp said on Tuesday it would offer buyouts or early retirement to all of its U.S. hourly union workers, and expects the lackluster North American market to rebound in the second half of 2008.
The top U.S. automaker posted a quarterly loss reflecting a slump in its North American market, but analysts were encouraged that the sweeping deal with the United Auto Workers covering 74,000 workers would cut labor costs more aggressively than expected.
Analysts also said the quarterly results showed that the top U.S. automaker would continue to face pressure in the U.S. market, which has been hurt by a slower economy, higher fuel costs, and tighter credit markets.
GM, whose share price rose 2 percent in early trading, has said the first half of 2008 is likely to be tough for industry sales in North America, but expects to see a rebound in the second half of the year.
Chief Financial Officer Fritz Henderson said January sales results strengthened that view after a fourth quarter that was hurt by lower North American production and deeper discounting on the automaker's pickup trucks.
For the year, GM expects to post improved global automotive results driven by gains in emerging markets but declined to offer a more specific forecast for the crucial and troubled U.S. market, still its largest by revenue.
"We are talking about global automotive operations, that is where we see an improvement," Henderson told reporters. "We are not really breaking it down between what regions are going to be the drivers."
NORTH AMERICA SWAMPED
For the fourth-quarter, GM posted a net loss of $722 million, or $1.28 per share, in the fourth quarter, compared with net income of $950 million, or $1.68 per share, a year earlier.
GM posted combined losses of almost $1.7 billion in North America and Europe that swamped gains of $437 million from operations in emerging markets in Asia and Latin America. The regional results included a $1.06 billion pre-tax loss in North America.
Excluding one-time items, GM posted a fourth-quarter profit of 8 cents per share that reflected a $1.6-billion tax accounting adjustment that boosted reported results. Analysts surveyed by Reuters Estimates had forecast an adjusted per-share loss of 61 cents, but it was not immediately clear how fully that reflected the tax gain.
Wall Street analysts said GM's fourth-quarter results underscored the continued pressure the automaker faces in the U.S. market.
"Given GM's performance in the past quarter, we remain comfortable with our expectation of a large operating loss in North America in 2008," Lehman Brothers analyst Brian Johnson said in a note for clients.
But analysts also said the enhanced buyout packages GM negotiated with the UAW could yield faster-than-projected savings on its payroll costs as older workers leave and are replaced with lower-cost new hires.
JP Morgan analyst Himanshu Patel called GM's forecast for improved automotive results "encouraging though perhaps optimistic," adding that the blue-collar attrition deal suggested "greater future savings potential."
Shares were up 44 cents, or 1.6 percent, to $27.57, in early trading on the New York Stock Exchange, after rising as much as 2 percent shortly after the opening bell.
GM's fourth-quarter revenue fell to $47.09 billion, from $50.8 billion in the same quarter a year earlier, a drop attributed to the spin-off of GMAC.
Auto revenue rose $3 billion to $46.7 billion on gains in Latin America, Asia and Eastern Europe.
GMAC, GM's former financing arm, reported a fourth-quarter net loss of $724 million a week ago. GM sold GMAC to a group led by Cerberus Capital Management, but retained a 49 percent stake that still contributes to the automaker's results.
GMAC's Residential Capital LLC unit is the second-largest independent U.S. mortgage lender.
GM ended 2007 with $27.3 billion in cash and marketable securities, up from $26.4 billion a year earlier.
Henderson said GM's pension plan, including reserves for factory and white-collar workers, was overfunded by about $20 billion at the end of 2007.
(Reporting by Kevin Krolicki and David Bailey; Editing by Derek Caney)
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