DETROIT - It's hard to ignore the second-largest quarterly loss in US history.
But General Motors Corp.'s record $39 billion loss on a charge involving unused tax credits was only one piece of dire news for the world's largest car company.
GM is hemorrhaging money, particularly in North America, and the outlook for 2008 and beyond is bleak. A soft US market, high gas prices, the housing slump, and jittery consumers will hamper the automaker's restructuring efforts, industry analysts said. GM reported the latest loss yesterday.
"We continue to expect the fundamentals to worsen before they improve," Bear Stearns analyst Peter Nesvold said in a note to analysts.
GM's third-quarter loss was the second-worst quarterly net loss in US corporate history under generally accepted accounting principles, said Howard Silverblatt, senior index analyst for Standard & Poor's. The loss was exceeded only by AOL Time Warner's $44.9 billion, or $10.04 per share loss, in the fourth quarter of 2002, he said.
GM attributed most of the loss to a $38.6 billion noncash charge related to accumulated deferred tax credits in the United States, Canada, and Germany. Accounting rules require companies to write down the value of such credits if they have scant prospects for a return to profitability in the near term.
Reaction was swift. GM shares fell nearly $2.19, or 6.1 percent, to $33.97. S&P cut GM's 12-month target price by $7 to $32, while Moody's Investors Service downgraded its outlook on GM from positive to stable.
The pain was all the more acute with Toyota Motor Corp.'s statement yesterday that its profit for the fiscal second quarter rose 11 percent to a company record $4 billion. Toyota and GM are vying for the title of world's largest automaker by sales this year.