Gm’s Massive Restructuring And Cost Cutting Endeavors Will Result To 4th Quarter Profit
Reports of profit coming from General Motors and Ford have become a rarity for the past few years. But GM would like to put an end to its ?losing? tradition and said that it will report a profit for this week.
The Detroit-based automaker and manufacturer of top-of-the-line GM heater cores has predicted a fourth quarter net profit after it has announced that there are errors in the company’s accounting which caused the delay of its quarterly and full-year financial results.
Analysts said not to expect that the profit will be huge but for General Motors a profit how little it is, signifies that their restructuring plan and massive cost cutting is finally paying off. GM has reported a total of $3 billion losses for the first nine months of last year and $10.6 billion loss for 2005. However, the automaker is positive that it will report a net income for the first quarter in two years once it finally announces it fourth-quarter and full-year 2006 results which it will report this week.
General Motors will not announce full-year figures
According to a dozen analysts interviewed by Thomson Financial, GM will say it earned $1.19 per share exclusive of restructuring costs and other special items for the fourth quarter. Ten analysts have also stated that for the full year earnings of GM, it will report earnings of $4.39 per share which excludes billions of dollars spent for restructuring costs that would probably leave it with a net loss.
One of the analysts of Argus Research, a New York-based equity research company said that the quarterly profits might continue for a while as GM gain from the cost cutting measures that it has been implementing but the big question now is: can the automaker be able to sustain it and for how long?
The Argus Research analyst have also added, that GM is entering a period in which the cuts have taken hold and have yet to be affected by inflation or anything else that would negate their impact on the bottom line.- Its kind of a sweet spot in here where the benefits of the cost cuts outweigh still-rising health care cost, still-softening market share over the longer term.?
In one of GM’s massive assembly and stamping complex in Lordstown Ohio, not remote from Cleveland, the thought of a profit and GM’s increased sales figures has somewhat re-energized 3,750 production workers according to local union President Jim Graham. ‘there’s confidence by the people an in the products because they know what they’re capable of. They know we’re going to come out of this thing stronger,? Graham added.
The world’s largest automaker is implementing a massive restructuring process that includes more than 34,000 blue collar workers who are taking early retirements and buyout offers. The automaker said that the reduction of its workers has helped it cut down cost by $9 billion annually. It has also saved more costs by developing a huge number of its vehicles globally.
If ever GM really announced a quarterly profit then it would be the first since the fourth quarter of 2004 when it has made $630 million. David Healy, an analyst with Burnham Securities and a GM shareholder said that GM might surpass the analysts? forecast for the fourth quarter that is if charges relating to the sale of 51 percent stake of GMAC would not affect the net earnings of General Motors.