General Motors Corporation (NYSE: GM) reported a $38.7 billion net loss for 2007, a company record. Though the shockingly large figure is an accounting reality more than a business one – GM used $39 billion of tax credits in the third quarter of the year that would have otherwise expired.
 
Despite tax management being the bulk of the loss, GM had combined losses of $1.7 billion in North American markets compared to a more modest profit of $437 from Latin America and Asia. The U.S. auto market has seen weaker sales in general recently due to a slow economy, but U.S. automakers Ford Motor Company (NYSE: F) and GM are particularly vulnerable because of their reliance on expensive pickup trucks and SUVs that use more fuel and require more financing. This combination generally makes them more difficult to sell in weak economies or during periods of higher fuel costs, both of which the U.S. is now experiencing.
 
Acknowledging the reality that U.S. sales may continue to be problematic, GM Chief Financial Officer Fritz Henderson said in the wake of today’s announcement “We are talking about global automotive operations -- that is where we see an improvement.”
 
GM is also seeking to minimize its largest cost, labor. It announced, in an unprecedented move, that it is offering voluntary buyouts to all of its U.S. union workers, totalling about 74,000 employees.
 
Depending on the employee, the offer includes up to a $62,500 payout in the form of a lumpsum of cash, retirement benefits or an annuity. The buyout is designed to drastically reduce the number of UAW represented employees and replace them with lower-wage workers in an attempt to compete globally. Even so, most analysts doubt GM will be able to make a profit in 2008.
 
Though GM faces severe challenges, the company still has more than $27 billion in cash and remains the world’s largest automaker. Whether or not it can maintain either of these positions may largely rest on the success of its worker buyout program.
 
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