GM Warns It May Not Be Able to Sell Stake

DETROIT - General Motors Corp. warned it may be unable to sell a majority stake in its finance division, in an annual report Tuesday that highlighted the myriad risks and financial woes confronting the world's largest automaker

GM has been counting on the sale of a 51 percent stake in General Motors Acceptance Corp. as a way to separate the division's debt rating from GM's own junk rating and raise as much as $15 billion in badly needed cash for the struggling automaker. But GM warned anew Tuesday that a deal may not happen.

"We are uncertain at this time if any transaction with respect to GMAC ... will occur or, if any transaction were to occur, on what terms," GM said. GM added that even if a transaction is completed, it's possible GMAC's credit rating could still hinge on GM's.

GM had hoped a new parent for GMAC would bring investment-grade credit ratings to the finance business, which was slashed to junk status last year alongside its sliding automotive parent. It was those ratings that caused GM to consider the planned sale, which was announced in October.

In the filing, GM also discussed the threat of a strike at supplier Delphi Corp. that could cripple GM.

The automaker also restated financial results from 2000 through 2004 because of a litany of accounting errors. GM had said March 16 that it was delaying filing its annual report because of an internal investigation into those errors.

Also Tuesday, GM said it is restating financial results for GMAC from 2003 through the third quarter of 2005. The restatement relates to the improper classification and presentation of cash flows for certain mortgage loans.

GM said it had concluded an internal investigation into Residential Capital Corp., GMAC's mortgage subsidiary, and determined that cash flow relating to certain mortgage activities was inappropriately classified.

The changes reduced operating cash flows but increased investing cash flows between 2002 and the first three quarters of 2005, the automaker said. GM said the restatement doesn't affect the income statements or net cash flows of GM, GMAC or ResCap.

GM also said it began investigating errors in the way it booked credits from suppliers, including Delphi, last April after getting a subpoena from the Securities and Exchange Commission. The SEC, which was seeking information on retroactive price adjustments GM had received from Delphi, is continuing to investigate GM and its suppliers.

GM said it erroneously booked supplier credits as a reduction of cost to sales between 2000 and 2004. After restatement, a deferred credit of approximately $548 million existed as of December 2004, which will be recognized as a cost of sales in future periods, the automaker said.

Burnham Securities analyst David Healy said GM's restatements were largely housekeeping measures that will have no effect on GM or GMAC's cash flow.

"If it wasn't GM in crisis mode and the whole feeding frenzy going on in the media, a small restatement like this wouldn't get any attention," Healy said.

But Healy said it was important for GM to get its finances straightened out in preparation for the possible GMAC sale. The filing "removes a minor burden" to the sale, Healy said.

Credit ratings agencies have said that they would probably lower GMAC's ratings closer to those of GM if the stake in the finance division isn't sold. Those lower ratings would dramatically raise the cost of funding for GMAC, as well as severely impede its access to capital.

If no sale occurs, GM said, "GMAC's access to capital may be seriously constrained, as most unsecured funding sources may decline, including bank funding."

The cost of secured funding may also rise without the sale.

A higher cost of funding would "significantly lower earnings and dividends," the filing said. "GMAC may need to consider divesting certain businesses in order to maintain adequate liquidity," the filing continued.

GM lost $10.6 billion in 2005, largely due to declining U.S. sales and rising costs. The company is in the midst of a restructuring plan and on Tuesday announced it was laying off several hundred salaried workers. GM also has offered buyouts to all of its 113,000 U.S. hourly workers in the hopes of cutting its hourly work force by 30,000 by 2008.

GM shares fell 1.7 percent in late-session trading on the news. Earlier, the stock dropped 18 cents to close at $22.75 on the New York Stock Exchange.

'The Simpsons' to Show Live-Action Opening

NEW YORK - Ever wonder what Bart Simpson would look like in human form? The longrunning animated Fox series "The Simpsons" is about to show you. The series will unveil a live-action opening sequence Sunday, 8 p.m. EST, a Fox spokeswoman announced Thursday.

In it, the dysfunctional cartoon family — Bart, Homer, Marge, Lisa and Maggie — will be seen as they would appear in real life, played by lookalike actors.

"I'm just amazed there are people who want to be known for looking like the Simpsons," said Al Jean, the show's executive producer, in a statement.

A team from British network Sky One created and commissioned the live sequence, which apes the long-running series' memorable opening shots: Bart writing on the chalkboard, Homer pulling the nuclear rod out of his shirt and Maggie and Marge at the supermarket, a Fox spokeswoman said.

"The Simpsons" was recently renewed for two more seasons, its 18th and 19th

Comcast Said in Talks on E! Networks

PHILADELPHIA - Comcast Corp., the nation's largest cable operator, is in talks with The Walt Disney Co. to buy the remaining 40 percent of E! Networks it doesn't already own, according to a person familiar with the companies' plans.

E! Networks, which is comprised of the E! celebrity channel and the Style fashion channel, is valued at around $3 billion, the person said Monday, declining to be identified because the deal has not been finalized.

Disney officials did not immediately return calls for comment Monday evening.

It's unclear how much Philadelphia-based Comcast would pay to acquire the rest of the network from Disney, which is based in Burbank, Calif., or how long it might take to strike any agreement.

The discussions were reported Monday by Broadcasting & Cable, a trade publication.

The talks are part of an expanded collaboration with Disney over carriage rights and making Disney content more available to Comcast's video on demand service.

In 1997, Comcast and Disney joined forces to buy E! Entertainment. Seven years later, the nation's largest cable operator made a bid to buy Disney itself for $66 billion, but the entertainment company's board rebuffed that effort.

Google Agrees to Settle 'Click Fraud' Case

SAN FRANCISCO - Google Inc. has agreed to pay up to $90 million to settle a lawsuit alleging the online search engine leader overcharged thousands of advertisers who paid for bogus sales referrals generated through a ruse known as "click fraud."

The proposed settlement, announced by the company Wednesday, would apply to all advertisers in Google's network during the past four years. Any Web site showing improper charges dating back to 2002 will be eligible for an account credit that could be used toward future ads distributed by Google.

The total value of the credits available to advertisers will be lower than $90 million because part of that amount will be used to cover the fees of lawyers who filed the case last year in Arkansas state court. The proposed settlement still requires final court approval.

The lawsuit, filed by Lane's Gifts and Collectibles on behalf of all Google advertisers, revolves around one of the most sensitive subjects facing Google and Yahoo Inc. (Nasdaq:YHOO - news), which runs the Internet's second largest marketing network.

Yahoo, which is also named in the suit, said Wednesday that it intends to fight the lawsuit's allegations.

Mountain View, Calif.-based Google makes virtually all of its money from text-based advertising links that trigger commissions each time they are clicked on. Besides enriching Google, the system has been a boon for advertisers, whose sales have been boosted by an increased traffic from prospective buyers.

But sometimes mischief makers and scam artists repeatedly click on specific advertising links even though they have no intentions of buying anything. The motives for the malicious activity known as click fraud vary widely, but the net effect is the same: advertisers end up paying for fruitless Web traffic.

The lawsuit alleged Google had conspired with its advertising partners to conceal the magnitude of click fraud to avoid making refunds.

The frequency of click fraud hasn't been quantified, causing some stock market analysts to worry Google's profits will falter if it turns out to be a huge problem.

Google executives have repeatedly said the level of click fraud on its ad network is minuscule — a contention that the proposed settlement amount seems to support.

The $90 million translates into less than 1 percent of Google's $11.2 billion in revenue during the past four years.

Google disclosed the settlement after the stock market closed. The company's shares fell $10.57 to close at $353.88 on the Nasdaq Stock Market, then shed another $2.11 in extended trading.

Japanese Cars Score Highest in Magazine

DETROIT - For the first time, all the top picks in Consumer Reports' annual vehicle guide are made by Japanese automakers.

The Honda Civic is the magazine's top small sedan, while the Toyota Highlander Hybrid is the top mid-sized sport utility vehicle, according to results released Wednesday. Vehicles from Nissan Motor Co. and Subaru, a division of Fuji Heavy Industries Ltd., round out the top picks in 10 categories.

Asian brands also fared best in the magazine's survey of vehicle reliability. Toyota Motor Corp.'s Lexus brand was first, while Honda was second and the Toyota brand was third. Ford Motor Co.'s Mercury brand was the only domestic nameplate to crack the top ten.

Consumer Reports' rankings are important to automakers, even though companies can't use the ratings in their advertising. Consumer Reports spokeswoman Lauren Hackett said the April auto issue is consistently the magazine's most popular, selling more than 300,000 copies at newsstands. That's twice as many copies as its second-most popular issue, the November electronics issue.

Consumer Reports began its top picks list in 1997. It is based on road and track tests, evaluations of comfort, convenience and fuel economy, crash protection ratings from the government and insurance industry and readers' reliability rankings. The magazine said it recently tested more than 200 vehicles to come up with its top picks.

Honda had the most winners, snagging top picks in five of the ten categories. Besides the redesigned Civic, the Honda Accord was the top family sedan between $20,000 and $30,000 and the Acura TL was the top upscale sedan between $30,000 and $40,000. The Honda Odyssey was the top minivan and the Honda Ridgeline, which is Honda's first entry in the pickup market, was the top pickup.

Toyota and Subaru each had two winners, including the Subaru Forester for small SUV and the Toyota Prius for "green car." Nissan had one, the M35 luxury sedan, which the magazine called "an excellent balance of performance, comfort and handling."

Reliability rankings are based on a survey of Consumer Reports subscribers who are asked if they have had serious problems with their vehicles in the past 12 months. The survey questions readers about 17 different trouble spots. For this year's survey, readers rated their experience with 810,000 vehicles from the 1998 through 2005 model years.

Consumer Reports said Japanese and Korean brands had 12 problems per 100 vehicles, while U.S. automakers had 18 problems and European makers had 21 problems. Asian and U.S. automakers have been improving their scores but appeared to stall in 2005, the magazine said. European automakers' ratings haven't changed substantially in the last four years, the magazine said.

After Lexus, Honda and Toyota, the brands rounding out the top ten for reliability were Mitsubishi, Subaru, Acura, Scion, Mercury, Mazda and Suzuki. The ten lowest-rated brands were Audi, Infiniti, Saturn, Lincoln, Jaguar, Mercedes-Benz, Volkswagen, Land Rover, Hummer and Porsche.

Microsoft Updates Web Search Offering

SEATTLE - Microsoft Corp. unveiled several new online technologies Tuesday, including early versions of an Internet classified service and a local search function that provides extremely detailed pictures of local streets.

Microsoft also said it plans to begin testing a desktop e-mail product designed to work with the company's online e-mail accounts, similar to Microsoft Outlook Express. The spate of online efforts are part of the Redmond, Wash.-based software maker's broader goal of improving its Internet-based offerings, to better compete with rivals such as Google Inc. and Yahoo Inc. (Nasdaq:YHOO - news) The new search function, dubbed "street view," aims to give people a driver's view of downtown Seattle and San Francisco, using pictures detailed enough to make out cars and people. Available in test form, it's similar to Amazon.com Inc.'s A9 search engine, which provides detailed street-level views of certain cities. Microsoft had previously announced plans to start the U.S. online classified service, called Windows Live Expo, in the hopes of competing with the likes of Craigslist. The test version launched Tuesday distinguishes itself from competitors by giving people the option to narrowly define who sees their listings. For example, sellers could make their goods available only to people who work at their company, based on e-mail addresses. Or they could limit their offerings only to people on their instant messenger "buddy list." It also hopes to be more geographically personalized by asking sellers to provide a ZIP code for searching purposes. Microsoft shares lost 18 cents to close at $26.87 Tuesday on the Nasdaq Stock Market.