General Motors said it had overstated its 2001 profits by as much as $400m (£230m) yesterday. The admission, in a statement issued on Wednesday in the United States, is the latest blow to investor confidence in a company struggling to reverse massive losses. The news hit the company's shares, which fell 7.5% after the announcement. The carmaker's shares - down about 40% this year - yesterday fell to $22.82 in midday trade.
The firm blamed the overstatement on its accounting for supplier credits and warned there could be further restatements for subsequent years. The supplier credits are "one of the matters" under investigation by the US financial watchdog, the securities and exchange commission. The regulator is also scrutinising GM's pension and healthcare liabilities.
After the terrorist attacks in 2001, GM started a no-interest financing programme that led to some of the strongest monthly sales in history. GM earned $1.2bn in 2001, after accounting for the sale of its TV and satellite unit, Hughes Electronics, which doubled its net income. Without the Hughes sale, GM earned $601m, meaning the restatement could be more than half those results if the figure comes in at the high end of GM's estimate.
The problems keep mounting for the world's largest carmaker. It has lost more than $3bn in the first nine months of the year as competition intensifies, raw material costs rise, consumers turn away from gas guzzling vehicles and healthcare and pension costs soar. Last week it reported a sharp decline in October sales. GM's outlook has deteriorated significantly due to the difficulties being faced by parts supplier Delphi, spun out of the company in 1999. Delphi recently filed for bankruptcy and GM has warned that it could face another $12bn in pensions and healthcare obligations under contracts signed when the supplier was spun off.
A GM spokeswoman tried to play down the importance of the restatement: "The issue here is that we basically booked the income in the wrong period," she told the Wall Street Journal.
