GM offers workers buyouts as posts loss

DETROIT (Reuters) - General Motors Corp said on Tuesday it would offer a new round of buyouts to all of its U.S. factory workers as it posted a quarterly loss that underscored the pressure the top U.S. automaker faces in its slumping home market.

Some analysts were encouraged that the sweeping deal with the United Auto Workers covering 74,000 factory workers could allow GM to cut labor costs more aggressively than expected.

But GM's results, including a record $39 billion full-year loss, also point to continued risks for the automaker's turnaround from a slower U.S. economy, higher fuel costs and tighter credit conditions, others said.

For the fourth quarter, GM reported a net loss of $722 million, or $1.28 per share, compared with net income of $950 million, or $1.68 per share, a year earlier.

GM said its fourth-quarter loss reflected lower U.S. production, more aggressive discounting on its recently launched full-size pickup trucks and weaker results in Germany, traditionally its most profitable market in Europe.

For all of 2007, GM posted a record net loss of almost $39 billion, reflecting a $38 billion tax-related charge taken in the third quarter. GM also posted net losses of $2 billion for 2006 and $10.4 billion for 2005.

For 2008, GM said it expects to post improved global automotive results driven by gains in emerging markets. But it declined to offer a more specific forecast for the crucial and troubled U.S. market, still its largest by revenue.

"We are talking about global automotive operations -- that is where we see an improvement," said GM Chief Financial Officer Fritz Henderson. "We are not really breaking it down between what regions are going to be the drivers."

NORTH AMERICA SWAMPED

GM posted combined losses of almost $1.7 billion in North America and Europe in the fourth quarter that swamped profits of $437 million from operations in emerging markets in Asia and Latin America.

"Given GM's performance in the past quarter, we remain comfortable with our expectation of a large operating loss in North America in 2008," Lehman Brothers analyst Brian Johnson said in a note to clients.

Calyon Securities analyst Mark Warnsman said: "Our view is that GM had a poor fourth quarter -- a particular concern given the apparently weakening economic environment in the first quarter."

GM did not detail the charges it expects to take for its new round of UAW buyouts but said savings from the program would start to show in the second half of this year and 2009.

The GM buyout offers, which follow parallel deals for UAW workers at Ford Motor Co and Chrysler LLC, take aim at a provision in a landmark labor contract reached last year that allows the Detroit-based automakers to hire new workers at about $14 per hour, about half the current average wage.

About 46,000 GM factory workers are currently eligible to retire and will be offered incentives of up to $62,500 to retire early. Others who agree to give up future pension benefits could take a lump-sum buyout of up to $140,000.

GM said its ground-breaking contract with the UAW would allow it to save between $4 billion and $5 billion per year when the terms of the deal were fully implemented after 2010.

More immediately, Henderson said GM would look to cut costs in its European operations and could throttle back further on North American production in 2008 if the market turned weaker.

GM expects industry-wide U.S. auto sales to remain almost flat in 2008 at above 16 million vehicles, supported by a second-half rebound.

That remains more optimistic than the outlook among many analysts, who expect a third consecutive year of falling demand to take U.S. sales down near 15.5 million vehicles.

KEY RISK

Another key risk for GM is whether its former subsidiary and major parts supplier Delphi Corp will be able to secure the financing it needs to emerge from bankruptcy under a deal led by Appaloosa Management LP, analysts have said.

GM's Henderson told analysts on a conference call that the automaker is exploring options for Delphi in cooperation with the Appaloosa investor group because of the difficulties in closing such financing deals in the tighter market for corporate debt.

"This situation essentially puts GM in a position where it will have to provide the financing itself," said KeyBanc Capital Markets analyst Brett Hoselton, who said the situation will have to be resolved within months.

GM's fourth-quarter revenue fell to $47.09 billion from $50.8 billion in the same quarter a year earlier, a drop attributed to the spin-off of GMAC.

GMAC, GM's former financing arm, reported a fourth-quarter loss of $724 million a week ago. GM sold a controlling interest in GMAC to a group led by Cerberus Capital Management, but retained a 49-percent stake. GMAC's Residential Capital LLC unit is the second-largest independent U.S. mortgage lender.

Shares in GM, which have gained 11 percent since the start of the year, were up 6 cents at $27.18 in late afternoon trading on the New York Stock Exchange.

(Editing by Brian Moss and Gerald E. McCormick)