GM posts biggest annual loss in a decade

DETROIT — General Motors Corp. posted its largest annual loss in more than a decade, laying bare the problems the automaker is facing: rising labor costs, fierce competition from Asia and falling sales at home. It was another blow for the U.S. auto industry, already reeling from massive job cuts announced this week by Ford Motor Co.

GM, which could lose its position as the world’s largest automaker this year to Toyota Motor Corp., said Thursday it lost $4.8 billion in the fourth quarter and $8.6 billion for all of 2005. That was the worst showing since 1992, when it lost $23.5 billion.

Sales gains in Asia, Europe and elsewhere were more than offset by huge losses in North America, where GM lost $5.6 billion for the year.

Company executives insist the results will improve in 2006, but GM shares slumped as concerned investors wondered if the company can win customers and extract sufficiently large concessions from its unions to stop the financial nosedive.

“It was surprisingly negative, well below the low end of the most pessimistic analysts, which is no small feat,” said Pete Hastings, vice president of corporate fixed income at the investment firm Morgan Keegan & Co. “I think you’ll see recovery off of 2005. But getting back to profitability in North American operations is a multiyear challenge.”

The company lost $15.13 per share for the year, far more than Wall Street’s forecast of a loss of $4.19 per share, according to analysts surveyed by Thomson Financial. Worldwide revenue of $192.6 billion for the full year was down slightly from 2004.

GM shares, already down 36 percent since July, fell 80 cents, or 3.4 percent, to close at $23.05 Thursday on the New York Stock Exchange. Moody’s Investors Service said it was reviewing GM’s credit rating, already in “junk” territory, and could downgrade it further.

“Two significant fundamental weaknesses in our North American operations were fully exposed — our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue,” said GM Chairman and CEO Rick Wagoner. He described 2005 as “one of the most difficult years in GM’s history.”

GM shares enjoyed a brief runup late on Wednesday after billionaire investor Kirk Kerkorian disclosed that he had reacquired 12 million shares of GM stock he sold in December. Analysts said the move suggested he had confidence in the company’s recovery efforts, but Merrill Lynch analyst John Murphy told investors that while Kerkorian’s presence will ratchet up pressure on GM’s management, “we believe things will get worse before they get better.”

A spokeswoman for Tracinda Corp., Kerkorian’s private equity firm, wouldn’t comment Thursday on GM’s stock slide.

Wagoner and other executives said they will move forward with GM’s turnaround plan, which calls for eliminating 30,000 jobs and closing 12 facilities by 2008. GM anticipates stronger sales this year because of its new lineup of sport utility vehicles and trucks, and it’s abandoning costly, confusing incentives in favor of lower prices on most vehicles.

But some analysts doubt GM’s new lineup of trucks and SUVs will do well, particularly if gas prices rise.