News From the Auto Industry

The company reported record third-quarter automotive revenue of $43.1 billion and record global sales for the quarter of 2.39 million cars and trucks.

It was the second-worst quarterly net loss in U.S. corporate history, exceeded only by AOL Time Warner’s $44.9 billion loss in the fourth quarter of 2002 when the value of the AOL operations was marked down, according to Howard Silverblatt, a senior index analyst for Standard & Poor’s.

Standard & Poor’s analyst Efraim Levy said the near-term outlook for GM has worsened significantly due to reduced sales in the United States and Europe and weakness in the U.S. housing market. S&P cut GM’s 12-month target price by $7 to $32.

“I would stress: No impact whatsoever on our cash position, no impact on our ability to use the tax offsets in the future, and from my perspective, really no change whatsoever in our outlook or optimism about the future of getting the business turned around,” he said.

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.

GM Chairman and Chief Executive Rick Wagoner said the accounting shift is not easy to explain but doesn’t have a substantial impact on the business.

The company reported an overall loss of $1.6 billion, or $2.80 per share, excluding special items. Besides the accounting change, special items included a $3.5 billion after-tax gain on the $5.4 billion sale of Allison Transmission in August.

Standard & Poor’s downgraded GM shares from hold to sell, and said GM’s near-term outlook has worsened significantly in part due to reduced U.S. sales.

GM’s chief financial officer, Fritz Henderson, said the company is bullish about its new products and the money it will save from a new four-year contract with the United Auto Workers, which was approved by workers last month and will be reflected in future quarters. An agreement to put GM’s retiree health care liability into a union-run trust won’t affect GM’s books until 2010, but the automaker will see some benefits from the contract starting next year, he said.