Car industry gloom descends on GM, BMW, Nissan
FRANKFURT/DETROIT (Reuters) - The meltdown in the global car industry claimed more victims on Friday as General Motors lost another $15.5 billion (7.8 billion pounds), BMW warned on profits and Nissan earnings missed expectations by a wide margin.
General Motor Corp's (GM.N) quarterly loss -- the third largest in its 100-year history -- came as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business.
The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter, refocusing investor attention on whether GM can complete a rushed restructuring before its cash and available credit runs down.
Germany's BMW AG (BMWG.DE), the world's biggest premium carmaker, said it would miss its 2008 targets after a 44 percent plunge in quarterly pretax profit.
"Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the U.S. dollar, the impact of the international financial crisis and a weaker U.S. economy," BMW said.
Nissan Motor Co (7201.T), Japan's No.3 automaker controlled by Renault SA (RENA.PA), posted a much worse-than-expected 46 percent drop in quarterly operating profit. It stuck to annual forecasts for its lowest operating profit in seven years.
On Friday, the world's automakers reported a 13.2 percent drop in U.S. auto sales in July as an uncertain U.S. economy bludgeoned manufacturers in the largest and most lucrative auto market.
It was the ninth consecutive month of declining sales in the U.S. market -- the first time that has happened since the last U.S. recession seven years ago -- and the worst showing since April 1992.
The roiling U.S. market has also made leasing an issue for U.S.-based automakers. Chrysler's financial arm has stopped supporting leasing in the United States, while GM and Ford Motor Co (F.N) have pared those programs in favour of adding retail incentives.
MORE RISK AHEAD
Because of that pullback and tighter credit, auto executives and analysts say the industry may be battered by double-digit sales declines in coming months and cannot forecast an end to the slide.
The economic contagion is spreading to other markets, leading to a decline in Europe of nearly 8 percent last month.
U.S.-based GM, Ford and Chrysler have taken a deeper hit from the shift toward cars than transplant automakers have in the United States because of their greater focus on trucks. However, few have been spared.
Ford reported a record $8.7 billion quarterly loss in late July and even reliable outperformer Toyota Motor Corp (7203.T) has slashed sales targets. Renault has backed away from its 2009 profit forecast, Honda Motor Co Ltd (7267.T) trimmed its expectations and Daimler AG (DAIGn.DE) sharply marked down its 2008 guidance.
Privately held Chrysler disclosed some financial figures on Friday to quell concerns about its financial strength.
Chrysler said its finance arm had successfully negotiated the framework for a refinancing of $30 billion in working capital and the automaker's operating cash flow kept it "well ahead of plan."
Chrysler, acquired by Cerberus Capital Management CBS.UL from Daimler a year ago, said it ended June with $11.7 billion in cash and earned $1.1 billion in the first half of 2008 before interest, tax, depreciation and amortization.
BMW, which had been widely expected to lower its 2008 targets after Mercedes-Benz parent Daimler's warning last week, dashed hopes for a quick rebound the following year.
"We assume that 2009 will be another difficult year full of challenges," Chief Executive Norbert Reithofer said.
BMW now expects the growing raw materials bill this year to make a further 400 million euro (315 million pounds) dent in profit as prices for steel, metals and plastics continue to rise.
Nissan's vehicle sales grew 6.9 percent in the first quarter thanks to brisk sales of the Qashqai crossover and Versa subcompact. But Nissan, like many of its rivals, is being forced to reduce light truck production amid flagging demand.
Underscoring the severity of the U.S. market, Nissan this week said it would offer buyouts at two plants in Tennessee in the hope of eliminating 1,200 workers, about a fifth of its head count. It is operating far below capacity in North America as sales of pickups and other big vehicles slump.
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DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.