GM reports record quarterly loss

GM hopes its new products will boost its competitive position in the US

General Motors (GM) has reported a record quarterly loss of $39bn (£18.5bn), due almost entirely to a massive one-off accounting charge.

GM said it was following accounting guidelines with respect to deferred tax assets in three countries.

Excluding the charge, GM still posted a net $1.6bn loss for July to September, compared with a $147m loss for the same period a year earlier.

GM's chief financial officer told the BBC its performance was "inadequate".

'Challenges'

Following news of the hefty loss, GM shares were down nearly 5% in late afternoon trading.

We have got to keep working very hard to improve Fritz Henderson, GM chief financial officer

"That cannot be considered adequate even with the challenges we face," Fritz Henderson told BBC World's World Business Report.

"We've got to keep working very hard to improve, to launch our great products, improve the quality of our brands, which we are doing, and take cost out of the operations, which we are doing."

GM said it was taking the charge because it had accumulated billions of dollars in potential tax credits in the US, Canada and Germany.

The company decided that because of its losses, it could no longer count on earning enough money to use the credits before they expired.

GM recorded a net profit of $953m in the first six months of 2007 after losing more than $12bn in 2005 and 2006.

However, accounting rules would still allow GM to claim those credits if it bounced back to profitability and could use the amounts to offset future taxes.

The charge will not affect the company's cash flow as it undergoes a sweeping restructuring programme.

'Uncertain outlook'

US auto sales are on track for their lowest industry-wide total in almost a decade at about 16 million units.

Executives at Ford Motor and Chrysler, GM's principal US rivals, have suggested the market could slide further in 2008.

Mr Henderson said GM's goal was to move into "a more sustainable profit position" but would not speculate on how long that might take.

Strong sales in emerging markets, particularly Russia, were a positive trend for the company but weak demand in Germany remained a major concern, he added.

He forecast gloomier times ahead for the US mortgage market, which GM is exposed to through its residential mortgage and car insurance arm GMAC.

"We need to significantly restructure the business to staunch those losses and then frankly reassess where we go from here," he said of GMAC's future.

"But at this point I have to say that the outlook is uncertain."