General Motors Corp. yesterday posted a loss of $1.6 billion in the fourth quarter of 1990, the biggest operating loss ever recorded by a U.S. automaker in a three-month period.
The disappointing fourth-quarter results were announced just hours after rival Ford Motor Co. said it lost $519 million in the latest quarter. Only Chrysler Corp., the smallest of the Big Three automakers, made a profit in the final quarter of 1990 -- $31 million that came more from aggressive cost-cutting than it did from auto sales.
Together, the automakers' losses in the fourth quarter topped $2 billion, making it one of their most disappointing quarters in a decade. Analysts and company officials don't expect the first quarter of 1991 to show any improvement.
The fourth-quarter results reflect "the convergence of the worst of all possible worlds" affecting the auto business, said Wendy Beale Needham, an analyst with Smith Barney, Harris Upham & Co. in New York. That fiscally troublesome confluence includes a recession, war in the Persian Gulf and excess capacity that is flooding the market with more cars than can be sold, Needham said.
Even in a normal year -- one free of recession, war or other economic turmoil -- automakers still would have the capacity to produce 1 million more cars than are needed to satisfy consumer demand in the North American market, Needham said. The average auto plant can produce about 200,000 cars a year, which means that the market has at least five plants too many producing cars, Needham said.
Overcapacity has yielded two evils: an industry addiction to costly rebates and other sales incentives, and increased industry dependence on fleet sales -- sales of huge lots of cars to captive rental car companies, for example -- to keep assembly plants running.
The result of all this excess capacity is that, even if the Persian Gulf War ends in the next few months and if the recession disappears along with the shooting, U.S. automakers -- including Japanese companies building cars and trucks in the United States -- are going to have a rough time making money, analysts say.
Certainly, that is the case at GM, according to Maryann Keller, an analyst at Furman Selz Mager Dietz & Birney in New York.
"Structural problems are very evident in the GM numbers, and those structural problems are that in terms of cost structure, GM is fundamentally less competitive than its domestic competitors," Keller said.
GM has long been accused of having too many plants, too large a work force and production procedures that are too complicated. Many analysts believe GM Chairman Robert C. Stempel tacitly acknowledged the correctness of that criticism last week when he announced major cutbacks at the company, including a 47 percent reduction in stockholder dividend payments, the elimination of 1990 executive bonuses and the scrapping of 15,000 more white-collar jobs by 1993, in addition to the 40,000 jobs that have been eliminated since 1986.
GM's restructuring "is a long-term program that will not bring huge returns in the short run," Keller said. "There is clearly more than a cyclical problem at GM," she said, referring to the current economic downturn, which also has caused best-selling Japanese stalwarts such as Honda Motor Co. to initiate production cutbacks.
The current earnings picture at the Big Three looks like this:
GM: The company's $1.6 billion fourth-quarter loss compared with profits of $700 million in the same period a year ago. It came on top of a $2.1 billion net loss in the third quarter, which stemmed mostly from the cost of closing plants. GM's total loss for the year was $2 billion, compared with 1989 profit of $4.2 billion.
Fourth-quarter revenue at GM was $26.4 billion, down from $27.7 billion in the same period last year. For all of 1990, GM sales slipped 1.8 percent to $124.7 billion.
Ford: The company lost $519 million in the fourth quarter, compared with a gain of $314 million in the year-ago period. Ford's 1990 earnings of $860.1 million were 78 percent below the $3.8 billion in profit it reported for all of 1989.
Fourth-quarter revenue at Ford was $24.2 billion, a slight increase over its $24.1 billion in sales for the year-ago period. Sales for the year totaled $81.8 billion, down from $82.9 billion in 1989.
Chrysler: Chrysler last week reported a net income of $68 million for 1990, an 81 percent drop from the $359 million it earned in 1989. Chrysler's revenue for the year was $30.6 billion, down from $35.2 billion in 1989.