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Tuesday, November 06, 2007

GM Taking $39 Billion Writedown

by Calculated Risk on 11/06/2007 06:06:00 PM

From MarketWatch: GM taking $39 bln non-cash charge in third quarter

General Motors Corp. said late Tuesday it will record a third-quarter non-cash charge of $39 billion because of accounting standards related to its deferred tax assets in the U.S., Canada and Germany. The company said the money is needed to establish a valuation allowance in part to compansate for unanticipated losses at GMAC Financial Services.
Here is the press release: GM to Record Non-Cash Charge for a Deferred Tax Valuation Allowance in its Third Quarter Financial Results
"SFAS No. 109 guidelines require that a valuation allowance should now be established due to more recent events and developments during the 2007 third quarter. A significant negative factor was the company's three-year historical cumulative loss in the third quarter of 2007 in the U.S., Canada and Germany on an adjusted basis. Another significant factor was the ongoing weakness at GMAC Financial Services related to its Residential Capital, LLC (ResCap) mortgage business, including substantial U.S. losses incurred in 2007. Finally, the company faces more challenging near-term automotive market conditions in the U.S. and Germany."