GM Posts Largest-Ever Loss by a US Company
Despite its $23.5 billion loss for last year, the biggest US carmaker forecasts a return to profitability in North America this year
GENERAL Motors Corporation has posted a $23.5 billion deficit for 1992, a figure more than three times larger than any corporation had lost before in a single year.
The report caps a week of ups and mostly downs for the world's largest automaker.
Ford Motor Company, second in size only to GM among US automakers, said Wednesday that it lost $7.4 billion in 1992 due to accounting changes and one-time charges, as well as a weak European performance.
That loss set a record for American companies, only to be toppled by General Motors a day later.
For the final quarter of the year, GM lost $651.8 million.
In 1991, General Motors lost a seemingly modest $4.5 billion. The 1992 numbers are a bit misleading in that the company's bottom line was pummeled by a series of one-time charges, including a $20.8 billion accounting change required by the Financial Accounting Standards Board, covering the cost of retirement benefits GM will have to pay well into the future.
But at a Thursday morning news conference, GM's chief financial officer, G. Richard Waggoner, emphasized that "for the fourth-quarter, the financial results looked good," after the discounting special charges.
Mr. Waggoner noted an improvement in GM's North American automotive operations. In mid-1991, losses were running $700 million a month, but now the automaker is getting those operations back in the black in 1993.
But there are numerous obstacles.
In an Ypsilanti, Mich., courtroom, Judge Donald Shelton may have inadvertently blocked the carmaker's important cost-cutting program.
In December 1991 the automaker announced plans to close 21 plants and eliminate 74,000 jobs. Part of the plan involved closing one of the two plants building the slow-selling Chevrolet Caprice.
That set off a battle between workers at the Caprice plants in Ypsilanti Township, Mich., and Arlington, Texas, who rushed to offer concessions to keep their plant open. Ultimately GM chose the Texas factory.
On Wednesday, Judge Shelton enjoined GM from transferring the production of its Caprice sedan from the Ypsilanti plant to any other facility. His unprecedented decision hinged on years of tax abatements GM had received from the Michigan community. While General Motors broke no formal contract, he ruled it reneged on a promise to keep the plant in operation as long as the Caprice remained in production.
If the decision is upheld under appeal, other communities could try to prevent GM from closing more plants.
While GM may rue Judge Shelton's ruling, it is more than happy to drop another major lawsuit.
On Nov. 17, 1992, NBC's "Dateline" television news magazine aired an extensive report claiming that GM pickups built between 1973 and 1987 are prone to catch fire after a side collision. During one segment of the broadcast, a pickup truck appears to burst into flames after being broadsided by a car.
On Monday GM filed a defamation suit against NBC. In a lengthy news conference, general counsel Harry Pearce used photos, videotape, and eyewitness reports to show the Dateline team rigged the accident. Among other things, GM's investigation found that model rocket engines were hidden beneath the truck and ignited by remote control to fake a fiery crash.
It didn't take long for the NBC camera to blink. On the Wednesday evening broadcast of "Dateline," anchors Stone Phillips and Jane Pawley apologized to GM. GM immediately announced it would drop the suit.
NBC agreed to pay the automaker $2 million to cover costs associated with GM's investigation and airing of grievances about the report.
The lawsuit had seemed a risky move to some observers, since it could have kept the public focused on the pickup-truck problem.
GM dealers say they have heard little from customers about the truck-safety issue so far.
Several safety groups have stepped up efforts to force a recall. And the National Highway Traffic Safety Administration is continuing its own investigation.
General Motors also announced it is putting advertisements back on NBC news programs. It said it is satisfied with the network's efforts to retract and apologize for its newscast showing a gasoline fire after one of the automaker's trucks was struck on the side by a car.
Meanwhile, the threat of a public backlash clearly played a role in the decision by GM and the other two big American carmakers to abandon plans to file charges of "dumping" against their Japanese rivals.
If all had gone according to plan, importers like Honda and Toyota would have been accused of selling cars in the United States for less than the same vehicles cost in Japan, a violation of international trade laws.
Big Three officials insist they decided to delay in order to give the Clinton administration time to negotiate with the Japanese government. But GM president John Smith may have revealed the real reasoning last week during an appearance at the Chicago Auto Show.
The review, he said, "has as much to do with what the press thinks of the data as the data itself."
And initial reports were highly critical of the Big Three, suggesting the dumping suit was really aimed more at limiting the Japanese market share.