Henderson: GM will keep tight rein on inventory

GM's Fritz Henderson says: "We're operating the business as if it will be a tougher industry in the second quarter."
DETROIT — General Motors intends to run a tight ship in North America, its largest market. The automaker is “absolutely committed” to aligning its production with demand and controlling costs, says COO Fritz Henderson.

Slow vehicle sales in the United States and special charges contributed to GM's first-quarter loss of $3.25 billion, reported last week. The automaker lost $42 million in the first quarter of 2007.

Not including one-time items, GM lost $350 million, compared with a loss of $10 million a year earlier.

“We do believe we need to manage our North American business in a more challenging environment,” Henderson said during a conference call. “We see stimulus arising in the second quarter and second half, but we're operating the business as if it'll be a tougher industry in the second quarter.”

Most of GM's reported loss came from one-time charges for its 49 percent stake in GMAC Financial Services and the Chapter 11 restructuring at Delphi, its former parts unit.

GM earnings
 20082007
Revenue$42.7 billion$43.4 billion
Adjusted net profit (loss)*($350 million)($10 million)
Net profit (loss)**($3.25 billion)($42 million)
Total automotive profit (loss)$392 million$231 million
North American auto profit (loss)*($611 million)($269 million)
*Excludes special items
**Includes special items

GM also said it lost about $800 million in the quarter because of costs stemming from the UAW's strike at supplier American Axle & Manufacturing Holdings Inc., which has idled several GM plants.

GM will hold down incentive spending and boost production for its hottest cars, Henderson said. “So we want to also manage the mix to where the customer is going,” he added.

Dealer inventories were at their lowest level since September 2005 with about 824,000 vehicles in stock, down about 206,000 vehicles from last April and down more than 84,000 vehicles from December 2007.

But full-sized SUV and truck inventory is still high. GM has shut down several shifts at truck and SUV plants. That will take 138,000 units out of the production schedule for the rest of the year. GM would resume production only if oil prices drop and demand for trucks rises, Henderson said.

Overseas, GM continues to make money. The automaker posted a combined $1 billion gain before taxes from operations in Asia, Europe and other regions. 

You can reach Jamie LaReau at jlareau@crain.com

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