Fifth Gear: GM 3rd Quarter Net Income Drops, Europe Looks Even Worse
The Detroit News reports that General Motors earned $1.5 billion in the third quarter, down about $200 million from a year ago. And, the company now says it expects to lose as much as $1.5 billion on its struggling European operations this year. By the way, here's a reminder that the phrase "beat analyst expectations" doesn't matter. What you want to do is look at the top line of a balance sheet - revenue - and the bottom line of a balance sheet - net income. You also need to look for things called "special items" that reflect one-time situations that affect a company's performance.
One of the special items that GM is taking this year is a $395 million writedown called a "goodwill impairment" for GM Europe. That essentially means GM Europe isn't worth as much as GM once thought it was. It seems a long time ago now that GM was saying Europe's problems were over and that the company might break even there for 2012. (It seems even longer ago that GM had a buyer for GM Europe, only to change its mind about selling.) Certainly, nobody thought at this time last year that Europe would be this bad this year. Of course, you couldn't have predicted the market slide that's taken place there, and as we know, Ford also thinks it's going to lose $1.5 billion in Europe for 2012 as well.
GM thinks its European performance will be "slightly better" in 2013, aka, it won't lose as much money, and it now thinks it will be back to break even in Europe by the middle of the decade. (GM is releasing more details of its European turnaround plan today and we'll list those in a separate story later on.) In another GM note, the company said 30 percent of its salaried retirees decided to take those lump sum pension payments, in lieu of a monthly check. That will reduce GM's pension liability by $28 billion, or about $2 billion more than it was expecting.
Photo: The Associated Press