Red faces at GM as 2005 results go into reverse gear

VAUXHALL-OWNER General Motors today admitted it was $2 billion (£1.1bn) deeper into the red last year than previously indicated.

The car giant revised its 2005 loss to $10.6bn (£6bn), equivalent to almost 85 per cent of its market value. It blamed the wider deficit on higher costs relating to the restructuring of its business and staff pension liabilities.

GM also said it would delay filing its annual report with United States securities regulators because it had mistakenly accounted for cash-flows from a mortgage subsidiary of GMAC called ResCap. It will also restate results from 2000 to 2004 due to ResCap.

The move comes as a fresh blow to the group, which has suffered heavy losses and dreary sales, particularly in the US. Detroit-based GM, which remains the world's number one car-maker by revenue but ranks just eighth by market value, is cutting 30,000 jobs over the next three years as it tries to become more competitive.

The firm's financial exposure to the car-parts supplier Delphi, which sought bankruptcy protection last year, has risen significantly. As Delphi's former owner and still a significant shareholder, GM is liable to pay the pension and healthcare costs of its workers.

Some analysts have been encouraged that GM's management team, led by chief executive Rick Wagoner, have been prepared to take hard decisions about the group's future operations.

But a recent report by credit rating agency Standard and Poor's claimed that "time was short" for GM to stave off bankruptcy.

Commenting on the losses, David Healy, an analyst at Burnham Securities, said: "It's not the end of the world. The accounting charges seem to be mostly timing, instead of earning in one period they have to state them in another."