GENERAL Motors (GM), the world's largest carmaker, shocked financial markets yesterday when it announced a US$39 billion (S$56.5 billion) loss due to a US$39 billion tax-related charge.

The news - plus the plunging US dollar and rising oil prices - sent US stocks tumbling in early trade yesterday. The Dow Jones Industrial Average slid 123.96 points, or 0.91 per cent, to 13,536.98 in the first half-hour.

Analysts said GM's explanation of the massive charge indicated that the carmaker had a stunning lack of confidence in its future profitability.

GM's shocker comes as the US economy is grappling with a housing market downturn and the fallout from a sub-prime mortgage crisis.

GM reported a net loss of US$39 billion, or US$68.85 a share, in the third quarter, compared with a net loss of US$147 million, or 26 US cents a share, a year earlier.

The loss was one of the biggest quarterly corporate deficits ever.

To put the size of the charge in context, the total value of all GM shares outstanding was only US$20.4 billion at the close of trading on Tuesday.

Excluding the whopping charge and other special items, GM lost US$1.6 billion, or US$2.80 a share. That compares with the 25 US cents a share loss expected by analysts.

GM's worst recent earnings came in 2005, when it recorded a loss of US$4.8 billion in the fourth quarter and US$8.6 billion for the year. Ford Motor lost US$5.8 billion in the same quarter and US$12.7 billion for the year - considered at the time a titanic loss.

The US$39 billion charge stands in stark contrast to GM's upbeat stance after the resolution of contract negotiations with the United Auto Workers union in September.

The charge stems from GM's use of an accounting tool to write off losses by taking future tax credits - known as "net deferred tax assets". Now, based on an internal accounting review, GM will remove those credits from the company's books.

The change is essentially an acknowledgment by GM that it no longer expects future profits large enough to offset those tax credits.

"They seem to have decided to take it all at once rather than a string of smaller write-offs over consecutive quarters," said Mr David Healy, a car industry analyst, who called the charge "a vote of non-confidence".

In its statement yesterday, GM stressed that the charge was an accounting adjustment and not related to current operations.

It said the charge "does not reflect a change in the company's view of its long-term automotive financial outlook".

LOS ANGELES TIMES, WITH ADDITIONAL INFORMATION FROM CNN