DETROIT - General Motors Corp. reported a $38.7 billion loss for 2007 on Tuesday, the largest annual loss ever for an automotive company, and said it is making a new round of buyout offers to U.S. hourly workers in hopes of replacing some of them with lower-paid help.
The earnings report and buyout offer came as GM struggles to turn around its North American business as the economy weakens.
GM hasn't had an annual profit in three years.
But GM Chairman and Chief Executive Rick Wagoner said the company made significant progress in 2007, reducing structural costs in North America, negotiating a historic labor agreement and growing aggressively in Latin America and Asia.
During a conference call with analysts and media, Chief Financial Officer Fritz Henderson said 2008 will be difficult, but the company sees the potential for significant earnings increases by 2010 or 2011 once it reduces its work force and labor costs and transfers its retiree health-care costs to a new UAW-run trust.
The Detroit-based automaker said it was offering a new round of buyouts to all 74,000 of its U.S. hourly workers who are represented by the United Auto Workers.
GM won't say how many workers it hopes to shed, but under its new contract with the UAW, it will be able to replace up to 16,000 workers doing nonassembly jobs with new employees who will be paid half the old wage of $28 per hour.
About 21,500 UAW members at GM are eligible for full retirement now and another 25,000 are eligible for other retirement options, GM said last month.
Workers age 50 or older with at least 10 years at GM will be allowed to retire early, while employees with at least 26 years and fewer than 30 can opt to quit and receive lump-sum payments until they reach 30 years. Any worker with at least 10 years at GM can accept a $140,000 buyout to leave with no additional benefits. Workers with less seniority can take $70,000.
Retirees can take payouts in lump sums, as an annuity or as a contribution to a 401(k) or individual-retirement account, GM said. They can also combine a cash payment with the fund option.
Most employees accepting buyouts will leave by July, "so I think we'd expect to see the savings in the second half of the year," Wagoner said in an interview on Bloomberg Television.
GM reached a four-year agreement with the UAW last year that lets it pay new workers about $14 an hour, about half the wage of current unionized employees, while reducing healthcare and retirement benefits.
Ford Motor Co. and Chrysler LLC already have announced similar buyout offers.
Henderson said GM's offer is "reasonably attractive," and the company raised the amount it was offering to match Ford and Chrysler. He said GM wants to implement lower wages as well as lower its overall worker headcount.
"We have a substantial amount we can do in terms of transformation of the work force," he said.
GM shares fell 52 cents to close Tuesday at $26.60.
GM's annual loss of $38.7 billion largely was due to a thirdquarter charge related to unused tax credits.
The 2007 loss topped GM's previous record in 1992, when the company lost $23.4 billion because of a change in healthcare accounting, according to Standard & Poor's Compustat.
Excluding the tax charge and other special items, GM lost $23 million, or 4 cents a share, for the year, compared with a net income of $2.2 billion in 2006, beating Wall Street's expectations. Analysts polled by Thomson Financial expected GM to post a full-year loss of 95 cents a share.
For the fourth quarter, GM posted a loss of $722 million, or $1.28 a share, compared with net income of $950 million in the year-ago quarter. Fourth-quarter charges included $622 million to Delphi Corp., GM's former parts division, for its restructuring efforts, and a gain of $1.6 billion because of tax credits related to GM's pension liabilities and the sale of GM's Allison Transmission unit.
GM reported $181 billion in revenue for the year, down from $206 billion in 2006. Its automotive business saw record automotive revenue of $178 billion in 2007, up $7 billion from a year ago thanks to growth in emerging markets and favorable exchange rates.
GM was profitable in every region outside North America.GM's Latin America, Middle East and Africa division reported a record $1.3 billion in earnings, more than double that of 2006. GM's Asia Pacific division earned $744 million, up from $403 million in 2006, while GM Europe reported a profit of $55 million, down from a profit of $357 million in 2006.
But GM's North American division continued to struggle, posting a $1.5 billion loss for the year, nearly identical to its $1.6 billion loss in 2006. GM's North American division also reported a loss of $1.1 billion in the fourth quarter, compared with a loss of $129 million in the year-ago quarter.
Wagoner said the weak U.S. economy and high commodity prices hurt turnaround efforts in North America. He said GM's decision to reduce low-profit sales to daily rental companies by 110,000 in 2007 also affected U.S. sales.
"We're pleased with the positive improvement trend in our automotive results, especially given the challenging conditions in important markets like the U.S. and Germany, but we have more work to do to achieve acceptable profitability and positive cash flow," Wagoner said in a statement.
GM's results also were dragged down by its 49 percent stake in GMAC Financial Services, which lost $2.3 billion in 2007. GM reported a $1.1 billionloss attributed to GMAC.
GM barely retained its title as the world's largest automaker in 2007, selling just 3,000 more vehicles than Toyota Motor Corp. GM sold 9,369,524 vehicles worldwide, up 3 percent from the year before.
Information in this article was contributed by Dee-Ann Durbin of The Associated Press and Greg Bensinger and Jeff Green of Bloomberg News.
