GM Files 10-K Report; Restates Earnings From 2000

[Guest Josh]

DETROIT – General Motors Corp. (NYSE: GM) today announced that it had finalized its 2005 financial results and filed its annual report on Form 10-K with the Securities and Exchange Commission. In addition, GM also included restated results for the years 2000 - 2004 on Form 10-K/A, as expected.

GM concluded its internal review involving the classification of cash flows principally at Residential Capital Corp. (ResCap), the residential mortgage subsidiary of GMAC. Revisions were made to the consolidated statement of cash flows for GM for 2002-2004, while the 2005 annual statement of cash flows was finalized and reported for the first time today as part of the 10-K filing. These restatements do not affect GM’s, GMAC’s or ResCap’s income statements, balance sheets, or the net cash flows for any of the affected periods. In addition, these revisions to consolidated cash flows do not affect GM’s cash flows from automotive operations.

In concluding the review, GM determined that the cash flows related to certain mortgage activities were not appropriately classified as either operating cash flows or investing cash flows. As a result, GM restated its financial statements relating to2002 – 2004, and for the first three quarters of 2005. These changes reduced operating cash flows and increased investing cash flows in each respective period by the same amount.

GM previously disclosed that it was restating its financial results for the calendar-year periods 2000 - 2004 and the first quarter of 2005 as a result of revisions in a number of other accounting areas. All of these matters are detailed in GM's Form 10-K/A and Forms 10-Q/A.

Furthermore, as a result of cash flow adjustments mentioned above and other previously announced adjustments, GM concluded its consolidated financial statements for 2002 – 2004 and for the first three quarters of 2005 should no longer be relied upon.

All of today’s filings are available on GM’s investor website ( http://investor.gm.com) as well as at the SEC.

FORWARD LOOKING STATEMENTS

In this press release and in related comments by General Motors' and General Motors Acceptance Corporation's management, the use of the words "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "seek," "may," "would," "could," "should," "believe," "potential," "continue," "designed," "impact," or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements in this press release and in related comments, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties.

While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, these statements are not guarantees of any events or financial results, and GM's actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K. Such factors include, among others, the following: the resolution of accounting issues relating to ResCap cash flows, the ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring, to achieve reductions in health care and pension costs and to implement capital expenditures at levels and times planned by management; the amount and rate of employee attrition; the pace of product introductions; market acceptance of the corporation's new products; significant changes in the competitive environment and the effect of competition in the corporation's markets, including on the corporation's pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; restrictions on GMAC's and Residential Capital Corporation (ResCap)'s ability to pay dividends and prepay subordinated debt obligations to us; changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; costs and risks associated with litigation; the final results of investigations by the SEC; costs and risks associated with litigation; the final results of investigations and inquiries by the SEC; changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, which could result in an impact on earnings; changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees; negotiations and bankruptcy court actions with respect to Delphi Corp.'s obligations to GM, negotiations with respect to GM's obligations under the pension benefit guarantees to Delphi employees, and GM's ability to recover any indemnity claims against Delphi; labor strikes or work stoppages at GM or its key suppliers such as Delphi or financial difficulties at GM's key suppliers such as Delphi; additional credit rating downgrades; the effect of a potential sale or other extraordinary transaction involving GMAC on the results of GM's and GMAC's operations and liquidity; other factors impacting financing and insurance operating segments' results of operations and financial condition such as credit ratings, adequate access to the market, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate, and changes in our contractual servicing rights; shortages of and price increases for fuel; and changes in economic conditions, commodity prices, currency exchange rates or political stability in the markets in which we operate.

In addition, GMAC's actual results may differ materially due to numerous important factors that are described in GMAC's most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K. Such factors include, among others, the following: the ability of GM, to complete a transaction with a strategic investor regarding a controlling interest in GMAC while maintaining a significant stake in GMAC, securing separate credit ratings and low cost funding to sustain growth for GMAC and ResCap and maintaining the mutually beneficial relationship between GMAC and GM; significant changes in the competitive environment and the effect of competition in the corporation's markets, including on the corporation's pricing policies; our ability to maintain adequate financing sources; our ability to maintain an appropriate level of debt; the profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM's contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi Corp.; funding obligations under GM and its subsidiaries' qualified U.S. defined benefits pension plans; restrictions on ResCap's ability to pay dividends and prepay subordinated debt obligations to us; changes in the residual value of off-lease vehicles; changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate; changes in our contractual servicing rights; costs and risks associated with litigation; changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; changes in the credit ratings of GMAC or GM; the threat of natural calamities; changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations.

Investors are cautioned not to place undue reliance on forward-looking statements. GM undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

Use of the term "loans" describes products associated with direct and indirect lending activities of GMAC's global operations. The specific products include retail installment sales contracts, loans, lines of credit, leases or other financing products. The term "originate" refers to GMAC's purchase, acquisition or direct origination of various "loan" products.

[Guest buickman]

Am I surprised??? The only question for me is how much longer the Board can continue to back "Red Ink Rick"? The only surprise is how anyone can even possibly imagine that this man has any chnace whatsoever to anything but completely destroy General Motors.

Buickman

[daves87rs]

Just curoius BM, does every post have to have "fire red ink rick"????

Hmm...it going to be rough.

[Northstar]

Am I surprised??? The only question for me is how much longer the Board can continue to back "Red Ink Rick"? The only surprise is how anyone can even possibly imagine that this man has any chnace whatsoever to anything but completely destroy General Motors.

Buickman

Last I checked, all of the restated years still were in the black ink, and in 2003 GM actually restated their earnings as higher than orginally stated.

If Wagoner wanted to destroy GM, he already had plenty of time. Your theory is such crap.

[Croc]

Yea...BM seems a bit constipated still.

Edited March 29, 2006 by Croc

[4gm]

"Bullsh#t Buickman" really knows how to cause a stir here. Doesn't he?

[enzl]

"Bullsh#t Buickman" really knows how to cause a stir here.  Doesn't he?

Granted, BM's an idiot...but, are there really people on this site that believe Rick is the best man for the job at hand?....he's an accountant and these are accounting issues....I wouldn't want this guy leading in such a critical time either

[evok]

Granted, BM's an idiot...but, are there really people on this site that believe Rick is the best man for the job at hand?....he's an accountant and these are accounting issues....I wouldn't want this guy leading in such a critical time either

Before you talk of somethings you do not know about or appear to not understand - have you gone through the filings? - I am going that right now.

Your statements are naive.

[enzl]

Before you talk of somethings you do not know about or appear to not understand - have you gone through the filings? - I am going that right now. 

Your statements are naive.

No, yours are. Rick is an accountant by trade. His company is, by any objective measure, not doing well in general. IMO, when your leadership has overseen the largest loss in company history (old news) and the SEC is up your butt regarding present and past reporting, its time to go.

These accounting issues destroy your credibility in the financial markets (that's where GM borrows money to finance its operations, invest in its future, etc...) any loss of confidence in your numbers = more time paying exorbinant costs for borrowing (& GM borrows Billions)....

I am fully qualified to comment, as I am not only in the automotive field, I'm an officer in a public company. I help write these filings and, unfortunately, I know exactly how they are supposed to be written.

Naive implies I don't know and, unfortunately, I know all too well what goes on at big public companies. (Enjoy your Kool-Aid while it lasts!)

Edited March 29, 2006 by enzl

[evok]

No, yours are. Rick is an accountant by trade. His company is, by any objective measure, not doing well in general. IMO, when your leadership has overseen the largest loss in company history (old news) and the SEC is up your butt regarding present and past reporting, its time to go.

These accounting issues destroy your credibility in the financial markets (that's where GM borrows money to finance its operations, invest in its future, etc...) any loss of confidence in your numbers = more time paying exorbinant costs for borrowing (& GM borrows Billions)....

I am fully qualified to comment, as I am not only in the automotive field, I'm an officer in a public company. I help write these filings and, unfortunately, I know exactly how they are supposed to be written.

Naive implies I don't know and, unfortunately, I know all too well what goes on at big public companies. (Enjoy your Kool-Aid while it lasts!)

OK

[evok]

Now that I in consultations with CPAs have actually gone throught the 10k, this 2 billion dollar discrepency does not appear to be a diliberate, falsification of financial results. The 10k is the official tally as opposed to the estimates that were used in January when the 8-k was released.

On page II-127

GM took a net increase in their Dephi and GMNA restructuring charges against earning of app. 1.5 billion. GM appeared to have initially underestimated what DPH and GMNA will cost them. Wagoner recently stated that DPH may cost GM 5.5 - 12 billion dollar. Wagoner and the 10k went on to state that DPH cost to GM should be on the lower band of the estimates. These new costs are reflected in the restatement.

GM also took a Goodwill expenditure of app. 400 million in the 4th quarter related to GMAC Commercial Finance Operation pertaining to the 1999 aquisition of the Bank of NY's commercial finance business. Previously it appears that this money was mis booked as cash flow and GM will take the charge in the 4th quarter.

This 400 million is the account irregularity that was not properly accounted for in earlier releases. The 10k went on to state that this occurred because of improper internal controls. In light of other pressing issues, this figure is less significant.

There are more significant issues that are in that document then the 1.5 billion NA resturcturing obligations and the 400 million SNAFU.

And when you start going through GMAC - there may be reasons why there have been no takers to date. Cash flow and selling Interest Only loans may cause concerns in the future compared to the 2004 results for GMAC.

So in summary - there are a lot more pressing financial concerns burried in this document than the over blow 1.5 billion dollar underestimate and 400 million dollar SNAFU.

My advise is to read the document and not what is reported out in the press.

Edited March 29, 2006 by evok

[enzl]

Now that I in consultations with CPAs have actually gone throught the 10k, this 2 billion dollar discrepency does not appear to be a diliberate, falsification of financial results.  The 10k is the official tally as opposed to the estimates that were used in January when the 8-k was released.

On page II-127

GM took a net increase in their Dephi and GMNA restructuring charges against earning of app. 1.5 billion.  GM appeared to have initially underestimated what DPH and GMNA will cost them.  Wagoner recently stated that DPH may cost GM 5.5 - 12 billion dollar.  Wagoner and the 10k went on to state that DPH cost to GM should be on the lower band of the estimates.  These new costs are reflected in the restatement.

GM also took a Goodwill expenditure of app. 400 million in the 4th quarter related to GMAC Commercial Finance Operation pertaining to the 1999 aquisition of the Bank of NY's commercial finance business.  Previously it appears that this money was mis booked as cash flow and GM will take the charge in the 4th quarter.

This 400 million is the account irregularity that was not properly accounted for in earlier releases.  In light of other pressing issues, this figure is less significant.

There are more significant issues that are in that document then the 1.5 billion NA resturcturing obligations and the 400 million SNAFU.

And when you start going through GMAC - there may be reasons why there have been no takers to date. Cash flow and selling Interest Only loans may cause concerns in the future compared to the 2004 results for GMAC.

I never accused rick of fraud, rather, an incompetent management and stewardship of a once great company....please note that Rick's signature appears at the end of each filing, indicating his legal responsibility for its contents...whether inaccurrate, fraudulent or otherwise, he is ultimately the man responsible.

I stand by every statement I made. An accounting expert should be held accountable for accounting issues within his company. If you couple that theory with the rest of the missteps, he deserves to go, IMHO. (I guarantee if you applied his last 18 months alone to a parallel situation at your workplace, you'd be fired. I know I would.)

[Croc]

If you are ONLY applying his last 18 months from an accounting perspective, then probably. Unfortunately for your argument, GM is not PriceWaterhouseCooper. Rick has done many other, non-accounting things, and that is why we supporters like him.

Also, mistakes are made. Frankly, I think being open and correcting them now is better than covering it up...something some foreign makes seem to like doing.

[Guest buickman]

He has allowed the marketing mavens to continue with their disastrous, irresponsible, goofball promos like GMS, Red Tag, and March Madness. The market share still drops like an anchor. Who is responsible? I say the man who brought us Ron Zarrella has no idea how to grow the business.

Last year the word was Resignation, this year it's Indictment.

"In Tuesday's filing, GM said a federal grand jury recently issued a subpoena in connection with supplier credits. And it said the SEC recently issued a subpoena in connection with an investigation of transactions in precious metal raw materials used in GM's auto manufacturing operations."

Forbes

Buickman

Edited March 29, 2006 by buickman

[evok]

I never accused rick of fraud, rather, an incompetent management and stewardship of a once great company....please note that Rick's signature appears at the end of each filing, indicating his legal responsibility for its contents...whether inaccurrate, fraudulent or otherwise, he is ultimately the man responsible.

I stand by every statement I made. An accounting expert should be held accountable for accounting issues within his company. If you couple that theory with the rest of the missteps, he deserves to go, IMHO. (I guarantee if you applied his last 18 months alone to a parallel situation at your workplace, you'd be fired. I know I would.)

You are refering to the Sarbanes Oxley Act Compliance and signatures on the 10k. In GMs case that was released yesterday.

Wagoner is not a CPAl.

[evok]

He has allowed the marketing mavens to continue with their disastrous, irresponsible, goofball promos like GMS, Red Tag, and March Madness. The market share still drops like an anchor. Who is responsible? I say the man who brought us Ron Zarrella has no idea how to grow the business.

Buickman

What the hell does this have to do with the discussion?

And Smale is gone!

[Guest buickman]

You know you are a very insightful man. Must be nice to have the GM PR department at your disposal. Mr Harris must be proud.

[evok]

You know you are a very insightful man. Must be nice to have the GM PR department at your disposal. Mr Harris must be proud.

It is called looking at the facts and trying to obtain as much information to make informed decisions and in the process ascertain the current situation as it applies to the historic problems facing this industry while not running half cocked with unsupported opinion based upon a personal agenda.

[Guest buickman]

You attempt to discredit my success while I point out glaring failure.

[evok]

Getting back to the discussion:

GMAC appears to now be heavily leverage by interest only loans thus making them suseptible to increases to the long term interest rate and possible default on the loans especially if housing prices drop. IMO this jump from 2004 could be a serious risk.

Principal Paid (2005 and 2004 column on the right)

$ in millions) 2005 2004 2005 2004

Interest only mortgages $ 43,298 $ 15,782 $ 19,361 $ 8,375

Option adjustable rate mortgages 5,077 6 1,114 12

High loan-to-value (100% or more) mortgages 6,610 9,473 13,364 15,076

Below market initial rate (teaser) mortgages 537 638 411 704

Mezzanine loans (characterized by high LTV, IO payments, and deferred interest) 65 216 154 142

Page 38

Edited March 29, 2006 by evok

[Guest buickman]

This looks like very important information but the presentation is somewhat confusing. Can you please clarify?

[Croc]

You attempt to discredit my success while I point out glaring failure.

You really enjoy your daily enemas don't you? That's kinda weird, no offense...

[enzl]

You are refering to the Sarbanes Oxley Act Compliance and signatures on the 10k.  In GMs case that was released yesterday.

Wagoner is not a CPAl.

IIRC, certain filings get CFO & Directors sigs. I was thinking Rick held a Director chair...my bad.

I just don't think he 'gets' it. Crisis mode got activated way too late. In my experience, companies generally restate when they've 'stretched' the numbers for a few quarters without an expected windfall quarter to cover the 'stretch.' Nothing illegal about it, but 9/10 stories of missed numbers or extra large losses start with that situation at its core....Auditor approved, it generall passed unnoticed until SOX....

[ShadowDog]

Playing devil's advocate for a moment, I offer the question of what you would do?

Here's the option being screamed from rooftops: remove upper management, or simply RW alone. Who would replace him? Would it be a person qualified to perform the activities of a CFO making the decisions based on consumer input in the development and manufacturing of a product? Is there even such a person? In my experience a Controller is the kind of person overseeing the financials of an operation; a treasurer, so-to-speak. A Manager is an operational and organizational planner, working with the numbers he's presented and acting upon them with an appropriate team of creative consultants or general input.

It sounds to me like some of you want all things from one person. Getting rid of RW isn't going to solve your problems; rather, at most, it'll offer a band-aid situation to an open-heart wound while wanna-be doctors stand around and mull over the best corrective measure.

Agree on your problems first, then decide corrective action.

...and some of you are Management material? God damn.

[evok]

IIRC, certain filings get CFO & Directors sigs. I was thinking Rick held a Director chair...my bad.

I just don't think he 'gets' it. Crisis mode got activated way too late. In my experience, companies generally restate when they've 'stretched' the numbers for a few quarters without an expected windfall quarter to cover the 'stretch.' Nothing illegal about it, but 9/10 stories of missed numbers or extra large losses start with that situation at its core....Auditor approved, it generall passed unnoticed until  SOX....

SOX IMO is a joke - but there was not a restatement of audited books for 2005 only unaudited estimates for the 4thQ. Take a look for yourself, 2005 was ugly period, making it uglier at this point is no big deal. I expect 06 to be bad. GM is going to have to book more DPH, more NA restructuring including the UAW buyouts and the packages to the salary staff. I expect this to last until 2008 at the earliest.

http://secfilings.nasdaq.com/filingFramese...F28%2F2006&pdf=

[evok]

This looks like very important information but the presentation is somewhat confusing. Can you please clarify?

It is in the 10k, above is the link and I did cite the page number. The format over here does not allow a pretty cut and paste.

Edited March 30, 2006 by evok

[sciguy_0504]

Some people on both sides are so tiring.

[enzl]

SOX IMO is a joke - but there was not a restatement of audited books for 2005 only unaudited estimates for the 4thQ.  Take a look for yourself, 2005 was ugly period, making it uglier at this point is no big deal.  I expect 06 to be bad.  GM is going to have to book more DPH, more NA restructuring including the UAW buyouts and the packages to the salary staff.  I expect this to last until 2008 at the earliest. 

http://secfilings.nasdaq.com/filingFramese...F28%2F2006&pdf=

SOX is a joke, but its what they came up with so....

My take on things is that 'crisis mode' (i.e. planning for a 'worst case' scenario in advance) is not like yelling fire in a theatre...its about assessing situations as they are (like Delphi's or the myriad of supplier failures in the past few years) and trying to head off the confrontation and bad press that comes with letting the situations deteriorate further (especially in the case of Delphi, where GM is left holding the bag, anyway.)...its also assessing best practices or successful paparallel business situations (Nissan was $20b in the hole) and integrating those things into your company...(there's nothing like hot product to cure many woes....ask Nissan or Chrysler)....and, most important, begin to create an atmosphere where change can florish, so that good ideas and different points of view make it to the surface. GM has been stuck in 40% market share mentality for 20 years. People have more choices and are not automatically waiting at the local Chevy place for a sedan anymore. It's very important to recognize this fundamental shift and act accordingly...I haven't seen much evidence, other than the Lutz hire, which indicates that GM has the stomach for 'no' guys. You need those guys so that some light can penatrate the darkness...just my .02, FWIW.

[evok]

SOX is a joke, but its what they came up with so....

My take on things is that 'crisis mode' (i.e. planning for a 'worst case' scenario in advance) is not like yelling fire in a theatre...its about assessing situations as they are (like Delphi's or the myriad of supplier failures in the past few years) and trying to head off the confrontation and bad press that comes with letting the situations deteriorate further (especially in the case of Delphi, where GM is left holding the bag, anyway.)...its also assessing best practices or successful paparallel business situations (Nissan was $20b in the hole) and integrating those things into your company...(there's nothing like hot product to cure many woes....ask Nissan or Chrysler)....and, most important, begin to create an atmosphere where change can florish, so that good ideas and different points of view make it to the surface. GM has been stuck in 40% market share mentality for 20 years. People have more choices and are not automatically waiting at the local Chevy place for a sedan anymore. It's very important to recognize this fundamental shift and act accordingly...I haven't seen much evidence, other than the Lutz hire, which indicates that GM has the stomach for 'no' guys. You need those guys so that some light can penatrate the darkness...just my .02, FWIW.

Without a long winded discussion on the business model and the structural changes that have been underway for years, and had just heated up again, the most significant aspect of GM that I and most of the public seem to agree is that GM has become less of a factor when it comes to purchasing a GM product.

IMO I have to give RW and Lutz the benefit of the doubt (2008) from what I have seen and heard of on the product side but the perfect storm might be upon GM and they are becoming just another choice in the business. A lesser factor everyday that passes.

I know I for one may not get a GM product to replace my current GM car when it comes time. That is unless they give the car to me for a steal. I am not the only one that feels that way, more and more people are.

I will not argue against current mgt on the structural moves for the most part but I sure as hell will not cheerlead any of GMs current product beyond the 900s. Until the product is turned around and becomes relevant again on the retail side, GM has some serious issues. It all comes down to the product, and I hate to STILL be talking future world.

Edited March 30, 2006 by evok

[97regalGS]

what GM needs is large, full size BOF RWD cars with pushrod V8 engines to.....

oops, sorry, wrong thread!

in all seriosuness, another thought provoking thread that makes for interesting reading. unfortunately, at this point I have nothing constructive to add, but, again, another good discussion.

[Guest Josh]

what GM needs is large, full size BOF RWD cars with pushrod V8 engines to.....

oops, sorry, wrong thread!

in all seriosuness, another thought provoking thread that makes for interesting reading.  unfortunately, at this point I have nothing constructive to add, but, again, another good discussion.

<{POST_SNAPBACK}>

You've been nothing but a smart ass in nearly every thread I've read of yours. Your lead in is nice, but you just lack the punch line.

[97regalGS]

You've been nothing but a smart ass in nearly every thread I've read of yours. Your lead in is nice, but you just lack the punch line.

just trying to keep the spirits of the troops up.

btw, is smart ass a 'personal attack'? you've been very concerned about that lately.