GM misstated '01 income by up to $400 million
Automaker says it improperly accounted for some supplier credits; SEC is investigating.
General Motors Corp., already under scrutiny from federal regulators for its accounting practices, said Wednesday that it overstated income in 2001 by $300 million to $400 million.
During a review of transactions with suppliers, the automaker discovered that it improperly recognized some supplier credits as income in the year in which they were received, rather than in future periods.
The U.S. Securities and Exchange Commission also is investigating the matter, GM said.
The automaker plans to restate earnings for subsequent periods, but said the amounts in those restatements aren't expected to be material, which means they are not likely to impact the value of GM stock.
GM declined to identify the suppliers.
In 2001, the automaker posted profits of $1.2 billion from continuing operations.
"We basically booked the income in the wrong period. We're going to restate it rather than taking it all in 2001," GM spokeswoman Toni Simonetti said. "The income still exists. It just shouldn't have been booked in all of 2001."
The company said in a filing with the Securities and Exchange Commission late Wednesday that the restatements are the result of an ongoing review of supplier credits from 2000 through 2005. Earlier this week, GM's audit committee determined the automaker's 2001 financial statements were not reliable, GM said in the filing.
The automaker expects to complete a review of the supplier credits by the time it files its annual financial report for 2005.
Last month, the automaker received subpoenas from the SEC concerning numerous accounting practices and transactions.
They include how GM calculates pension and other retiree benefit obligations; transactions between the automaker and auto parts maker Delphi Corp.; how the automaker recovers and records the costs of recalls from suppliers; and how the automaker calculates and records supplier price reductions and credits.
The SEC is also exploring GM's possible obligation to fund Delphi's pension plans following the auto parts maker's bankruptcy filing last month.
The disclosure, announced Wednesday after U.S. markets closed, is another setback in GM's efforts to reassure investors amid mounting losses in its core automotive operations.
The automaker's shares tumbled 4.8 percent to close at $24.63 in New York Stock Exchange trading Wednesday. It was the lowest closing price for the company in 13 years.
The shares slumped after Fitch Ratings Inc. lowered its credit rating on GM's debt several more notches below investment grade, with a negative outlook.
GM has lost $3.8 billion in the first nine months of the year and has posted four consecutive quarterly losses, its longest stretch without a profit in 13 years.