DETROIT – General Motors Corp.'s (GM) disclosures that it lost $2 billion more last year than previously reported and needs more time to sort out accounting errors in the finance business it wants to sell gave investors fresh reasons to worry about the world's biggest automaker. They sent GM's shares price down nearly 5 percent Friday, shaving more than a half-billion dollars off its market value.
Despite the market's reaction, one analyst saw a silver lining, saying the hefty new charges GM is taking related to a bailout of Delphi Corp., its former auto parts subsidiary, suggested the companies were getting close to a deal with the United Auto Workers Union.
"That increase to me suggests that the three-way negotiations among the autoworkers union, Delphi and GM are progressing," said David Healy, who follows the auto industry for Burnham Securities.
GM said after the market closed Thursday that it now estimates it lost about $10.6 billion in 2005 compared with its preliminary report of a loss of $8.6 billion. The company also said it was delaying filing its annual report with the Securities and Exchange Commission for up to two weeks after uncovering accounting problems.
The disclosures come as GM is losing market share at home to Asian automakers and is trying to find wayspting to negotiate a revised labor agreement with Delphi and the UAW. The Troy-based supplier has asked the UAW and other unions to agree to pay cuts of more than 60 percent for its 34,000 unionized hourly workers. The unions have refused.
GM relies heavily on Delphi for parts and says it could be contractually liable for up to $12 billion in benefits promised to Delphi workers. As part of its 1999 spinoff of Delphi, GM guaranteed some pension and post-retirement costs in the event of bankruptcy by the supplier.
Moody's Investors Service said the delayed filing increases the risk of default and warned Friday that it could further downgrade the long-term debt ratings of GM, GMAC and ResCap.
Concerns over the potential for default by GM were also reflected in the credit default swaps market, where investors can effectively buy insurance protection from defaults. Wider credit default swap spreads suggested an increased perception of risk in GM debt.
But some analysts said the financial impact of Thursday's announcement was minimal and consisted largely of shifting charges from one period to another.
"It's a list of housekeeping items," said Healy of Burnham Securities. "I hate to disappoint the people who want to panic over all this."