GM predicts huge acounting loss

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The Independent Online
(First Edition)

GENERAL MOTORS will take a dollars 21bn accounting charge against its 1992 results to cover projected employee healthcare costs, reducing shareholders' equity in the world's largest car maker by more than two-thirds.

In an attempt both to dramatise the scale of the American medical insurance crisis and to put its own financial difficulties behind it, GM said it planned to comply with new US accounting rules by writing off its entire retirement benefit liability at once.

Compounded by other charges and by huge operating losses in 1992, GM's net loss for the year is now expected to be more than dollars 23.5bn, eclipsing the dollars 4.97bn record loss announced last month by IBM. GM's fourth-quarter and year-end results are to be released next week.

If the charge had been taken last September after GM's last reported quarter, shareholders' equity would have been reduced to about dollars 10bn, a spokesman, Bill Winters, said yesterday.

The accounting change does not, however, affect the company's current cash flow or ability to pay dividends.

Changes adopted last year by US accounting standards officials require companies to account for the future cost of their commitment to pay health insurance benefits to their hundreds of thousands of retired employees.

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