General Motors reported a $39 billion third quarter loss yesterday, the largest in the company’s history. The huge loss was the result of GM taking $38.6 billion non-cash charge, indicating a higher risk of a slow turn around that could prevent the automaker from claiming expected future tax credits.
GM stated that it took the charge due to losses in the United States and Canada over the last three years, as well as Germany through the most recent quarter. The automaker also blamed the charge on “ongoing weakness” at finance company and former subsidiary GMAC.
According to Automotive News, companies are allowed to keep credit on their balance sheets to offset future tax liabilities if they are found to have overpaid past taxes. But U.S. accounting rules state that companies expecting to keep losing money cannot carry the the tax credits indefinitely, and must claim them at some point.
GM Chairman and Chief Executive Rick Wagoner said that he doesn’t expect the loss to affect the day-to-day activities at GM. “It doesn’t have any impact at all,” he said. “I would encourage people not to overreact in a negative way to it.”
GM’s losses in North America totaled $247 million last quarter — not including the charge — up from a $667 million loss the year before. “We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging North America market conditions,” Wagoner said.
GM’s 49% stake in GMAC lost the automaker a reported $757 million last quarter.
GM failed to mention when it expects to turn a profit.
