GM's stock tumbles after loss disclosure

Talks between GM, Delphi and the UAW are progressing, an industry expert said.
DETROIT (AP) -- General Motors Corp.'s 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 ways to cut its costs that are swelled by rising health care and pension liabilities.
GM shares fell $1.09, or 4.9 percent, to close at $21.13 on the New York Stock Exchange, where they have traded as low as $18.33 over the past 52 weeks. The drop in share price cuts GM's market capitalization by $616 million to just under $12 billion.
Credibility
The delay in filing the annual report and the disclosure of accounting errors "undermines management's credibility with investors," Morgan Stanley analyst Jonathan Steinmetz wrote in a research note. GM had stated last week that it would file its annual report on time, he noted.
GM said the accounting errors relate to transactions at ResCap, the residential mortgage subsidiary of its finance arm, General Motors Acceptance Corp. The company said the problems could affect earnings from prior years.
GM is trying to sell a controlling stake in GMAC. Such a sale would hurt GM's profits but improve the finance division's ability to borrow money by separating its debt rating from the non-investment, or junk, rating that has been assigned to parent GM. Some major investors are prohibited from buying securities that carry a high-risk rating.
The biggest reason for the increase in GM's 2005 loss was an increase in the charge for its exposure relating to Delphi's Chapter 11 bankruptcy case by $1.3 billion to $3.6 billion.