Transcripts

GM's Big Loss

SUSIE GHARIB: General Motors posted the biggest annual loss ever by an auto maker today. It lost $38.7 billion in 2007 as it worked to turn around its North American business. Excluding charges, but including a $1.6 billion tax gain, GM actually earned $0.08 a share in its fourth quarter. The struggling auto maker also announced a fresh wave of employee buyouts. As Diane Eastabrook reports, industry watchers believe those buyouts are a step in the right direction.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: General Motors says sluggish auto sales in North America and Europe contributed to its worst year in history. As a result, the company today offered another round of buyouts to its 74,000 union workers in the U.S. Under the deal, 46,000 workers could retire now and receive up to $65,000 in cash, plus pension benefits. The remaining workers could walk away from their jobs and benefits and pocket up to $140,000 in cash. GM's chief financial officer Fritz Henderson says GM could replace some of those workers with lower-paid employees.

FRITZ HENDERSON, CFO, GENERAL MOTORS: This is a key step in us being able to transform our workforce and actually begin to new hire workers into some of these non-core jobs at the second tier wage, so we can be much more competitive on a cost basis.

EASTABROOK: Still, Henderson admits GM faces another difficult year in the U.S. A struggling economy could keep many consumers out of showrooms. GM has responded to that situation by rolling out incentives on many vehicles. GMAC, the finance unit General Motors owns a stake in, is also struggling. It lost more than $2 billion last year due to losses in its mortgage division. Henderson says efforts are underway to prop up that unit.

HENDERSON: I wouldn't say we are at all satisfied with where the situation is. But a lot of actions have been taken in order to reduce the balance sheet, reduce exposure, reduce losses and I think we'll start to see the benefit of that in '08.

EASTABROOK: Despite its problems, analysts think General Motors is headed in the right direction. The company has reduced fleet sales and improved its product mix. Global Insight auto analyst Rebecca Lindland is also impressed with GM vehicle sales outside the U.S. REBECCA LINDLAND, AUTO ANALYST, GLOBAL INSIGHT: There is a lot of potential on a global basis with emerging markets such as China, where GM sold over a million units last year, 2007, and also Latin America, where they are having very good profits as well as higher sales.

EASTABROOK: GM thinks it should be profitable in another two years. But Lindland thinks that forecast is a bit optimistic. She thinks it could take another three years before the auto company is back in the black. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.