Transcripts

GMAC May Put The Brakes on GM's Recovery

SUSIE GHARIB: Quarterly earnings at General Motors skidded way off the road today, plunging 90 percent from a year ago. The numbers were nowhere near what analysts were expecting, and GM shares tumbled 5 percent. As Diane Eastabrook reports, houses, not cars put the real dent in the struggling auto giant's results.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: General Motors had good news and bad news for investors today. The good news, global auto sales improved in the first quarter compared to the same period a year ago. The bad news, General Motors Acceptance Corp -- of which GM owns a 49 percent stake -- lost more than $300 million because of residential mortgage losses. But chief financial officer Fritz Henderson says steps taken at GMAC should improve that unit's results in the current quarter.

FRITZ HENDERSON, CFO, GENERAL MOTORS: It's about reducing volumes in particularly non-prime production of loans, reducing some of our lending into non-prime originators. Frankly, we've seen run off (ph) in our (INAUDIBLE) investment portfolio, a large portion of which is non-prime.

EASTABROOK: Excluding special items, GM earned $0.17 a share in the first quarter, a far cry from the $0.87 Wall Street was expecting and the $0.62 GM earned during the same period last year. Investors weren't pleased, pummeling GM's stock price throughout the day. Still, GM touted improvement in its global auto operations, where sales increased 3 percent in the first quarter. While losses at GM North America narrowed, Henderson admitted more work needs to be done cutting costs and attracting buyers into showrooms.

HENDERSON: From our perspective, it's about continuing to rebuild our brands, position ourselves properly, make sure that our quality message gets out and then frankly execute.

EASTABROOK: Analysts say GM has improved its product lineup, but they think more cost cuts are in order. Morningstar analyst John Novak says that will mean tough contract negotiations with the United Auto Workers this summer.

JOHN NOVAK, AUTO ANALYST, MORNINGSTAR: I think certainly health care will be on the table, further plant closures will likely be on the table and ultimately the company just needs to continue working to reduce their costs, which is easier said than done.

EASTABROOK: GM's Henderson says the company has been working cooperatively with the union, but he wouldn't speculate about upcoming negotiations. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.