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From Automotive News:

GM raises 2005 loss by $2 billion

DETROIT (Reuters) -- General Motors on Thursday said its 2005 loss was $2 billion deeper than previously reported due to charges related to factory job losses, its finance arm GMAC and the bankruptcy of former subsidiary Delphi Corp.

GM also said it would delay filing its annual report with securities regulators because it had mistakenly accounted for cash flows from a mortgage subsidiary of GMAC called ResCap. It will also restate results from 2000 to 2004 due to ResCap.

The massive loss for 2005, revised to total $10.6 billion, represented almost 85 percent of the current market value of the top U.S. automaker as of the close of trade on Thursday.

At $18.69 per share, the loss was also just shy of GM's closing price at end December after a year-long slide that cut the stock's value by more than half.

Because of the delay in filing GM's revised annual report, it was impossible to know how the increased charges would affect the $16.8 billion in cash GM's auto operations held at end December.

Shares in GM closed on Thursday at $22.22 and have gained almost 16 percent this month on signs that the company was making progress in its turnaround efforts. In after-hours trade the stock slipped about 1 percent to $22.

One analyst said it was encouraging that GM had raised its estimate of the cost to resolve problems at Delphi since that could suggest a resolution that would avoid a crippling strike.

GM said its mortgage-related accounting problem would not change reported net income, but could change its statement of cash flows at ResCap, GMAC and the parent company.

GM said it expected to file its annual report with the U.S. Securities and Exchange Commission within the next two weeks.


Among the revisions, GM said it was taking a $1.7 billion charge as it shuts factories and lays off workers, up from an initial $1.4 billion for that sweeping restructuring.

The Detroit-based company, which remains the world's No. 1 automaker by revenue but ranks No. 8 by market value, has been slashing costs and cutting capacity as it adjusts to the loss of market share to Asian rivals in its core U.S. market.

The increased charge added $300 million in costs that GM said it expected to incur once its current contract with the United Autos Workers union expires in September 2007.

Under the current union contract, idled factory workers are able to collect salary and benefits in a costly program known as the JOBS bank. GM has not disclosed the number of workers in that program, but union and analyst estimates put the total at over 7,000.

GM said it was in talks with the UAW to reduce that number through a cost-saving program of buyouts and early retirement.

GM also said it was increasing the estimate of its exposure to former subsidiary Delphi Corp. to $5.5 billion before taxes from an earlier estimate of $3.6 billion.

It said that its total exposure could be as high as $12 billion, but would probably be much lower if a three-way deal including Delphi and the UAW could be clinched.

Absent such a deal, Delphi CEO Steve Miller has said he would ask a federal bankruptcy judge to void the supplier's existing labor contracts, setting the stage for a strike that could cripple GM.

J.P. Morgan analyst Himanshu Patel said in a note last month that a work stoppage at Delphi could cause GM's U.S. operations to grind to a halt and cost it some $5 billion in cash a month.

For that reason, GM's recognition of a higher cost for Delphi could actually be read as a positive development, said Erich Merkle, of auto tracking firm IRN Inc.

"This sounds good," Merkle said. "We've felt all along that GM would have to provide some kind of early retirement or other buyouts. Obviously, they're raising cash for something."

When GM spun off Delphi in 1999 it guaranteed the pensions and benefits of the union workers.

GM said in its statement that a further revision to its estimate of Delphi-related expenses was possible before it filed its annual report, expected by the end of the month.
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