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No Profits Down the (Short-Term) Road, GM Warns"
DETROIT General Motors Corp. saw its stock price fall 14% yesterday -- down to $29.01 per share, the lowest price since the October 1987 market collapse -- as the automaker warned investors it would post a $1 billion loss for the first six months.The automaker also said it would make 300,000 fewer vehicles this year than it anticipated. That bad news fueled downward spirals for automotive suppliers such as Delphi Corp., whose biggest customer is GM. At the close of trading Wednesday, Delphi's already battered stock price had fallen to $4.64 a 6% one-day decline. GM said it is revising its first-quarter and calendar-year earnings guidance to reflect lower North American sales and production volumes, a tougher pricing environment, and a more car-based sales mix. The automaker now expects to report a loss of $850 million, or $1.50 per share, in the first quarter of 2005, excluding special items, compared to a previous target of break-even or better. For the calendar year, GM expects to report earnings of $1 to $2 per share, excluding special items, compared to a previous target of $4 to $5 per share. Analysts reacted negatively to GM's announcement. The consensus, according to published reports, is that GM may not turn a profit this year. Moreover, the long-term outlook is compounded by fears that its products are overpriced, analysts said, as reflected in falling resale values.Today's edition of The New York Times quotes Scott Sprinzen, a credit analyst for Standard & Poor's: ""The concern for us is not just this year, but what that says longer term about how G.M. is going to fare," he said."Clearly we have significant challenges in North America," said Rick Wagoner, chairman and chief executive officer. "The rest of our automotive businesses, and GMAC, are running in line with, or ahead of, our expectations. But North America is our biggest business, and the key driver of automotive earnings and cash flow. So it's important that we get this business right."John Devine, vice chairman and chief financial officer, said the competitive environment in North America means GM must search for more ways to cut costs, particularly in the area of health care. GM, which insures 1.1 million workers and retirees, is the nation's largest private provider of health insurance.Moreover, the high price of gasoline triggered by record-high prices for petroleum is causing sharp declines in sales of sport utility vehicles and other models that consume higher quantities of fuel, GM noted.Still, the company said it is "encouraged" by sales of newly introduced cars and trucks such as the Lordstown, Ohio-built Chevrolet Cobalt as well as the Pontiac G6, Buick LaCrosse and Chevrolet Equinox. "The Chevrolet Cobalt continues to gain share in the entry-level segment and will gain further momentum with the availability of the Cobalt coupe just coming on line as well as more engine choices and a high performance SS model," GM said.Production volumes at GM's Lordstown Complex will not be cut, said Tom Mock, communications director. "In fact, we've worked overtime Saturdays this month," he noted.GM said it intends to continue to aggressively strengthen its brand portfolio with the introduction this year of the Chevrolet HHR, Monte Carlo and Impala; the Hummer H3; the Pontiac Solstice, Torrent and G6 coupe; the Cadillac DTS; the Buick Lucerne; and the Saab 9-3 wagon and 9-7X."We are staying the course on our key product programs and, in fact, are planning to accelerate the introduction of some of our most important launches," Wagoner said. Visit General Motors at www.gm.com"