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Slumping SUV Sales Drive Losses at GM

Japanese Competitors Gain Market Share

January 26, 2006

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Lagging SUV sales continued to hurt General Motors Corp. as the auto giant posted a fourth-quarter net loss of $4.8 billion. The losses exceeded Wall Street expectations and GM blamed the red ink on high costs, shrinking market share and sluggish sales of SUVs.

Ford is also in trouble, with falling sales and huge losses. But President Bush warns the two remaining U.S.-owned automakers shouldn't expect Washington to come to the rescue. The company should develop "a product that's relevant," Bush told the Wall Street Journal.

"I think it's very important for the market to function," Bush said, insisting he was optimistic about the companies' prospects.

GM's losses for 2005 are now $8.6 billion as the company struggles with five straight quarters without profits.

"It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed -- our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," CEO Rick Wagoner said in a statement.

GM is banking on a new line of large SUVs to help produce profits in the year ahead.

GM sales are expected to be down again in January as Toyota and Honda both rack up double-digit sales growth. Edmunds.com projects that General Motors sales will fall by 5 percent.

At the same time, Honda and Toyota sales are likely to show sharp sales increases this month. Honda's U.S. sales in January will be up 18 percent to 96,000 vehicles, and Toyota's sales will be up 16 percent to 164,000 vehicles, Edmunds.com estimates.

GM earlier this month said it expects to cut North American structural costs by $6 billion by the end of 2006. Cutting structural costs will mean lay offs and plant closings for the world's largest automaker.

GM said its automotive operations lost $1.5 billion in the fourth quarter, driven by large losses in North America, where it has been losing market share to foreign rivals such as Toyota Motor Corp.

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