GM Posts $1.5B in First-Quarter Earnings

Tuesday, April 15th 2003, 12:00 am
By: News On 6

DETROIT (AP) _ Boosted by improved overseas results and record earnings at its finance arm, General Motors Corp. on Tuesday posted first-quarter results that easily topped year-ago tallies and Wall Street estimates.

For the year, however, GM said it is now less certain it can meet its earnings target, and its stock price fell in morning trading.

The world's largest automaker earned $1.5 billion, or $2.71 a share, in the January-March period, compared with $228 million, or 57 cents a share, in the first quarter last year.

Excluding a gain from the sale of GM Defense for $1.1 billion and results from GM's Hughes Electronics Corp. subsidiary, GM earned $1 billion, or $1.84 a share.

That's up from $791 million, or $1.39 cents a share, in the year-ago quarter.

Including Hughes, which GM last week said it plans to sell to News Corp., but excluding proceeds from the defense sale, GM earned $1.81 a share in the quarter, well above the consensus Wall Street estimate of $1.54.

``The first quarter financial results reflect solid contributions from both our automotive operations and our finance unit,'' said GM chairman Jack Smith, who retires May 1. ``I'm confident that GM has the right products and the right management team to continue to leverage our strengths.''

Total revenue was $49.4 billion in the first quarter, compared with $46.2 billion in the year-ago period. Automotive and financing revenue, which excludes Hughes, rose 5 percent to $46.3 billion.

Last week, Rupert Murdoch's News Corp. agreed to acquire control of Hughes, DirecTV's parent, in a $6.6 billion cash and stock deal. News Corp. agreed to buy GM's interest in Hughes and enough other shares to give Murdoch control of 34 percent of Hughes stock.

Most analysts predicted a strong first-quarter for GM because of a year-over-year production increase and ongoing cost reductions overseas.

The second-quarter, however, is expected to be another story as GM and its rival, Ford Motor Co., sharply reduce production to reflect rising inventories and sluggish demand.

In morning trading on the New York Stock Exchange, GM shares tumbled $1.32, or 3.7 percent, to $34.80.

A production cut is significant because automakers consider a vehicle sold when it is shipped from the manufacturing plant to a dealer, not when the dealer reaches an agreement with a buyer. As such, diminishing production can reduce the automaker's bottom line.

Ford, which reports first-quarter results Wednesday, has scaled back second-quarter production 17 percent.

While North American production rose in the first quarter, overall results were down because of intense pricing pressure in the form of incentives, higher pension expenses and currency exchange losses. GM North America earned $548 million in the quarter, down from $654 million last year.

GM's U.S. market share fell to 26.6 percent in the latest quarter from 28.2 percent a year earlier.

``While market conditions were admittedly challenging, market share performance in North America did not meet our expectations,'' said GM president and chief executive Rick Wagoner, who will replace Smith as chairman next month.

``We're launching new products in key, high-volume segments of the market to improve our competitiveness, and we expect to remain aggressive in the marketplace,'' Wagoner said.

GM Europe narrowed its loss in the quarter to $65 million, significantly better than the $125 million loss a year ago. The company said the improvement reflected better sales and cost cutting at Opel and Saab.

GM Asia Pacific earned $75 million in the quarter, up from $7 million in the year-ago period.

General Motors Acceptance Corp., the automaker's financing arm, reported record earnings of $699 million, up 60 percent from a year ago, aided by a record performance at its mortgage operations.

GM said it expects moderate economic growth in the United States this year, resulting in total light vehicle sales in the low to mid-16 million range _ in line with most forecasts.

But the automaker said it is not certain it will hit its calendar-year total of $5 a share ``given the uncertain economic conditions around the globe.''

GM declined to give updated guidance for the year.

Last week, the credit ratings agency Standard & Poor's lowered its outlook for GM to negative from stable while affirming its corporate debt ratings.

S&P cited several reasons for the downgrade: cyclical weakening demand in the North American market, intense pricing pressures, expected weakening of light-truck profitability, market share gains by foreign competitors and growing pension liabilities.