GM earnings delay raises concerns
NEW YORK (CNNMoney.com) -- Shares of General Motors fell sharply as it
announced it would miss a deadline to report quarterly results and its
primary supplier missed a self-imposed deadline to reach a new labor deal
with its unions.
Shares of Dow component GM (Charts) were off as much as 3 percent
immediately after the announcement of the problem.
The company's shares gained ground in the afternoon after it reported an
unexpected pickup in U.S. sales in February, having said only two days ago
that it expected a dip in sales. But they quickly gave up this gain and were
off by more than 1 percent by late afternoon.
In a filing with the Securities and Exchange Commission, GM said that it
would not report the 10-K, which details its fourth-quarter results, by the
March 1 SEC deadline and that it would file for the allowed two-week
extension for that report. It said it does expect to file by the new March
The delay comes as GM weighs accounting issues for some past deferred tax
liabilities, derivative instrument accounting and hedging activities in past
years that will likely lead to restatements. It also is waiting for final
accounting of results of the GMAC finance unit. GM sold a 51 percent stake
in the finance arm to a private equity group as of Nov. 30.
Analysts surveyed by earnings tracker First Call forecast that GM earned
$1.19 a share in the fourth quarter, excluding special items, compared to a
loss of $2.09 a share on that basis a year earlier.
"I think they'll come out clean with a large profit. But unless there was a
large problem that couldn't be resolved, they wouldn't have delayed it, so
it is a concern," said analyst David Healy of Burnham Securities. "My guess
is they won't receive quite as much cash on closing [for GMAC] because of
the conditions in the real estate market. But I don't think it's a huge
Credit rating agency Standard & Poor's issued a statement Thursday that said
it did not believe GM's ratings would be affected by the delayed filing
because it is unlikely that any of its debt contained clauses that would
penalize it for the delay. But S&P said it would have to look at lowering
the credit ratings further into junk bond status if it appeared that GM
would miss the March 16 deadline.
"At the moment we think it's just a lot of accounting complexity that they
need to get right," said Bob Schulz, S&P's senior automotive credit analyst.
"If it's more than that, we'll have to see what it is. We're not happy they
missed the deadline."
Separately, bankrupt auto parts maker Delphi (Charts), a former unit of GM,
announced late Wednesday that it had not been able to reach an agreement
with GM and its unions by the end of February, as it had planned. That is
serious because a group of private equity firms that have committed $3.4
billion in financing to the parts company had the right to pull out of the
deal if there was no agreement by Feb. 28.
But Delphi announced that its investors had entered into an agreement with
the investor group that extends their right to pull out of the investment
deal to 14 days after giving notice.
GM looks to buy time on annual report
DETROIT (Reuters) -- General Motors Corp. said Thursday it would request an
extension with securities regulators until March 16 to file its delayed
annual report and fourth-quarter results.
GM (Charts) shares were more than 2 percent lower in late morning trade on
the New York Stock Exchange.
The automaker said that it would not be able to file the 2006 financial
report by the initial deadline of Thursday without "unreasonable effort or
GM said that it would request the extension in a Friday filing with the
Securities and Exchange Commission.
The delay in filing its annual report was the latest accounting
embarrassment for the world's largest automaker, which last year pledged to
tighten its controls after restating six years of results and disclosing
accounting probes by the SEC.
GM said in mid-February that it had "substantially completed" a review of
two accounting issues that have forced it to restate financial results back
to 2002 again.
At that time, GM said it was "working toward filing" its 2006 results by the
March 1 deadline, but expected to be granted an extension, if needed, to
file by March 16.
GM, the world's largest automaker, delayed its filing of financial results
for the fourth quarter and 2006 in part because of difficulties in preparing
the balance sheet for its former financial arm GMAC as of the close of the
sale of the unit.
GM sold a 51-percent stake in GMAC to a consortium led by Cerberus Capital
Management in November for $14 billion.
On Feb. 16, GM said it had almost completed a review of two problematic
areas of its own accounting going back to 2002 - its treatment of deferred
income taxes and financial derivatives.
Neither of the changes is expected to have an impact on GM's previously
reported cash flows, the automaker has said.
Separately, GMAC has said it is working on its own restatement going back to
2001 because of problems in its accounting for interest rate hedges.
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