The takeaway from the GM numbers is that expectations for auto sales, particularly in North America, appear too high and is exacerbating concerns about a softer U.S. consumer.
Forget about the somewhat confusing $39 billion non-cash charge. Traders and analysts are disappointed at the continuing operations numbers. GM's loss from continuing operations was well below street expectations.
Losses at the automotive division in North America and Europe were greater than most expected; and there also appears to be deep losses at GMAC (stemming from problems at the mortgage division); that also appears to be a factor in the write-down.
As for the $39 billion non-cash charge, it was taken to write down the value of its deferred tax asset and wiped out all the deferred tax credits GM had accumulated over the last three years.
Confusing I know, but here's what Credit Suisse said about it: "As we understand the accounting standard, the valuation allowance is triggered when there is both a great deal of evidence of past losses and a dearth of evidence of future profits."
A dearth of evidence of future profits. That's the story.
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