GM (GM): It's All Overseas Now

GM (NYSE:GM) reported fourth quarter and full year earnings.One thing was clear GM’s prospects are now almost entirely overseas. With total car sales likely to fall one million units this year, GM can’t make money n the US.

In the fourth quarter 2007, GM posted adjusted net income of $46 million or $.08 per diluted share, compared to adjusted net income of $180 million, or $.32 per diluted share in the year-ago period. Including special items, the company reported a net loss of $722 million, or $1.28 per diluted share in the fourth quarter 2007, compared to net income of $950 million, or $1.68 per diluted share in the year-ago period.

GM reported revenue of $47.1 billion in the fourth quarter versus $50.8 billion in the year ago period, with the decline more than accounted for by the exclusion of GMAC revenue starting December 1, 2006

GM North America (GMNA) posted an adjusted loss before tax of $1.5 billion for 2007 (reported loss of $3.3 billion), compared to a loss before tax of $1.6 billion in the year-ago period, Losses for the year in GMNA were largely attributable to a softer U.S. market, and the strategic actions to reduce dealer inventory by approximately 150,000 units and lower sales of daily rental vehicles by about 110,000 vehicles in the U.S.

The company simply can’t turn this tide in 2008 and probably not for several years to come. The competition in the US is simply too great and the market may shrink again in 2009.

Odd as it may seem, Latin America may be the single brightest spot in the world for the General. With a 19 percent increase in sales to a record 1.2 million units in 2007, GM Latin America, Africa, Middle East (GMLAAM) achieved a record $1.3 billion in adjusted earnings before tax for the year (reported income of $1.3 billion), up 140 percent over 2006 adjusted earnings of $561 million (reported income of $518 million). GMLAAM also set a sales record in the fourth quarter with 341,000 units, up 18 percent year over year, generating $424 million in adjusted earnings before tax (reported income of $424 million), up from $76 million in the fourth quarter of 2006

News from Asia was also good, driven mostly by sales in China. GMAP posted adjusted earnings before tax of $744 million in 2007 (reported income of $681 million) compared to $403 million (reported income of $1.2 billion) for 2006.

GM is no longer a US car company. It market share has fallen from over 40% to under 25% in the last decade. The assault from Toyota (TM), Honda (HMC) and their Asia peers have killed the US are a profit engine for the company.

South of the border and across the Pacific is where the future of the company is now and in the future. The US is lost.

Douglas A. McIntyre