GM has announced a $US39 billion dollar third quarter loss the majority of which was made up of $US37.38 billion in special non-cash charges added to its balance sheet. The non-cash charges represent a change in accounting for tax credits that GM are not allowed to account for until it earns the taxable income to which the credits apply.
GMAC (49 percent owned by GM) played their part in the enormous loss, posting a $1.6 billion third-quarter loss mainly due to their Residential Capital LLC unit, the second-largest independent U.S. mortgage lender who has endured four consecutive quarterly losses due to its exposure to the US mortgage market.
When looked at in layman terms the book loss does not reflect the fact that GM is actually performing reasonably well as an auto maker with their world wide car manufacturing business recording a $US122 million profit up from a $US455 million loss for the same period last year. Globally sales have increased some 4 percent to a record 2.39 million.
The issue faced by GM is its home market, currently reeling from the sub-prime mortgage market fallout. GM still relies on the domestic market for around 73 percent of its sales so while markets like China, Russia and India expand at unprecedented rates its really the home market that GM needs to see turn-around and that???s not likely to happen anytime soon.
[Source: Automotive News]