GM (GM): The Death Of Hope As Market Share And Asia Slide

GM posted a massive net loss was $15.5 billion or $27.33 per share for the second quarter, including these charges and special items, compared with net income from continuing operations of $784 million or $1.37 per share in the second quarter of 2007. With the one-time items taken out, the loss was $6.3 billion or $11.21 per share

Revenue from continuing operations fell to $38.2 billion from $46.7 billion.

Analysts polled by Thomson Financial expect the Detroit-based automaker to post a loss of $2.62 per share on $44.57 billion in sales.

The numbers in the US were to be expected. The company lost $4.4 billion in its home market compared to a $92 million profit last year as car sales fell sharply. GM’s market share fell from 22.7% last year to 20.2% in the latest period.

Revenue and earning in Europe was soft, with net dropping from $345 million to $99 million

But, it was revenue in Asia, where GM really needs growth that was the biggest disappointment of the quarter. Sales there  were remarkably weak, dropping slightly to $5.2 billion. Asia moved from a profit of $294 million to a loss of $65 million.

On the balance sheet, cash and investments totaled $21.0 billion on June 30, 2008, down from $23.9 billion on March 31, 2008.

At the end of the day, it is two numbers which make the huge loss worse than it first appears.

GM cannot recover if it does not have substantial growth in the Asia markets, especially China, which may become the largest car market in the world this decade.

Just as important, GM’s market share is likely to drop below 20% during the current quarter. Even with cost cuts, the car company cannot make money with its piece of the US at a level which is that depressed.

GM’s news was bad at home and the rest of the world made it worse.

Douglas A. McIntyre