General Motors makes record $39bn writedown

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The Independent Online

General Motors unveiled its largest ever loss yesterday due to a major tax charge and continuing difficult conditions in North America.

Despite some incremental improvements achieved as part of the torturous recovery efforts being staged by America's largest car maker, the company was forced to write down $39bn (£18.5bn).

The charge was related to deferred tax assets in North America and Germany. The company was also hit by the $2.3bn loss registered by ResCap, the mortgage-lending arm of GMAC, the financing business that the motor group partly owns.

Chief executive Rick Wagoner tried to put a positive spin on the smaller victories won by the company, including record results on number of cars sold, 2.39m, and quarterly turnover – $43.1bn, with especially strong sales growth in emerging markets such as Asia and Latin America.

"We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging North America market conditions," Mr Wagoner said. "We are very encouraged by our performance in emerging markets. Our record third-quarter global sales are strong evidence that our commitment to great cars and trucks is being embraced by consumers around the globe."

Even so, the group chalked up an underlying $1.6bn loss for the third quarter, ending a halting resurgence that had seen the company post modest profits during the previous three quarters. The company lost $247m during the quarter in North America—its main market and also the focus of its efforts to overhaul the business—an improvement on the $660m it lost a year ago.

Investors were disappointed by the backslide, sending GM shares down 5.7 per cent to $34.12 in late afternoon trading. Jonathan Stenmeitz, an analyst with Morgan Stanley, derided the company's performance as "messy and weak".

The company has been jockeying with Toyota for the title of "world's largest carmaker" most of the year after its Japanese rival caught and briefly passed GM for the first time, threatening to end the American company's 76-year reign atop the global auto industry.

GM has been trying to turn around falling sales and trim a massive cost base. The company is America's largest private health insurance provider and reached a crucial agreement with the UAW union in September to create a new fund that will pay massive healthcare liabilities that had added up to $1,000 to the cost of every car made.