GM loses First position in market, Profits drop

General Motors Corporation, the world’s largest car manufacturing company, has seen a major drop in its first quarter profits this year. For the first time, the company has been ousted from its No. 1 position by Toyota.

Compared to last year’s profits, the company’s profits fell by 90% this year. Analysts say it might be due to the collapse witnessed in the sub-prime mortgage business.

Pre-market trading saw a drop of share prices by 2.6%. GM’s share-prices decreased by 84 cents and were last stable at $31.60. The automaker’s earnings equaled $94 million, which equates to 17 cents a share. Last year, the scenario was much better, with earnings of $350 million, or 62 cents a share.

GM’s income for this quarter stands at $62 million or 11 cents a share. A year ago, the company’s income was $602 million, or $1.06 per share.

According to CEO Rick Wagoner, "This quarter's results again demonstrate progress in the implementation of our North America turnaround plan. They reflect major cost reductions once again, which more than offset lower volume -- a function of the disciplined implementation of our product-based sales and marketing strategy. And, our newest products such as the GMC Acadia and Chevrolet Silverado have been well accepted by consumers, which gives us confidence that the most important element of our North America turnaround -- product excellence -- is well on track."

There has been a reported decrease in the sales figures as well. As compared to sales of $52.4 billion last year, this quarter saw a sale of $43.9 billion. The drop in sales has been allegedly due to a sale of 51% stake in GMAC to private equity players.

GMAC or General Motors Acceptance Corporation was the financial services branch of General Motors. The sale of 51% stake in the company to a consortium led by Cerebrus Capital Management, has been a step further in GM’s divestiture plan. The step would gather $14 billion over a period of three years.

GMAC has reported a net loss of $305 million in the first quarter this year, compared to net income of $495 million, last year. For the first quarter, GM recognized a net loss of $115 million associated with its 49% ownership of GMAC, including the accrual of dividends on GMAC preferred membership interests and certain tax benefits realized.

GMAC results indicate a net loss of $910 million at its mortgage unit, Residential Capital. However, its first quarter net income stands at $605 million, which is more than double the earnings generated in the first quarter of 2006. GMAC anticipates a considerable improvement in Residential Capital's earnings performance in the second quarter this year. This is due to the fact that losses in the U.S. residential mortgage sector expected to be at a much-reduced level.

GM sales in the North American markets fell due to reduced sales to rental car companies. Revenue decreased to $42.9 billion. Though this is lower than last year’s $43.6 billion, it is still higher than the $40.9 billion forecast from First Call. While auto revenue decreased 8 percent in North America, it gained in the company is other three regions, standing at 5 percent in Europe, 13 percent in South America, Africa and the Middle East, and 35 percent in the Asia-Pacific region.

GM North America reported an adjusted loss of $85 million in the first quarter of 2007. This is an improvement of $166 million compared to an adjusted net loss of $251 million in the first quarter, last year. The improvements can be attributed to savings in health care and manufacturing related expenses.

Although GM failed to match Wall Street’s expectations, it fared better than rival Ford Motor for the first quarter. Ford Motor reported a loss of $171 million in the quarter.