With a US$10.6 billion loss for its 2005 financial year, pressure is being mounted on General Motors Corporation's Chairman and Chief Executive Officer Rick Wagoner, seen here during a media briefing in January. - REUTERS
REUTERS:
GENERAL MOTORS Corp. shares and bonds fell on Friday after the automaker increased its 2005 loss by $2 billion due to accounting errors, raising questions about the company's management and renewing doubts about its long-term survival.
GM's board of directors held an unscheduled discussion on Friday in the wake of the disclosures, the Wall Street Journal said in a report on its web site, citing a person familiar with the matter.
A GM spokeswoman could not be reached for comment.
Late Thursday, GM said its 2005 loss was $10.6 billion, including new charges related to job losses; its finance arm, GMAC; and the bankruptcy of former subsidiary Delphi Corp.
GM also said it would delay filing its annual report and would restate results for the years 2000 through 2004 after mistakenly accounting for cash flows from a mortgage unit. It further said it had incorrectly accounted for some supplier payments, including those from Delphi, and vehicle leases.
INVESTORS WARY
"Is this another blow to management? I would say yes," said Kevin Tynan, an analyst with Argus Research. "But you can't say management was on very steady ground in the eyes of investors."
PRESSURE ON INCREASES
The Detroit-based company, which remains the world's No. 1 automaker by revenue but ranks No. 8 by market value, has been slashing costs and cutting
capacity as it adjusts to market share losses to Asian rivals in its core U.S. market.
Some auto industry analysts said pressure was mounting on GM Chairman and Chief Executive Rick Wagoner, who rose to the helm of the company in 2000 and took over control of its struggling North American unit in April 2005.
Wagoner also faces heightened concern on Wall Street that GM could be headed for an eventual bankruptcy, in part to cut labour-related costs that have sapped profitability. Peter Morici, a professor at the University of Maryland business school, said there was no reason to believe that Wagoner and his management team could turn GM around.
"Absent change, GM will run out of cash and go bankrupt. I do think Wagoner has got to be replaced. I had not got to that point until now," Morici said.
Taken from The Sunday Gleaner, March 19, 2006
