General Motors Earns $1.75 Billion
Tuesday, July 18th 2000, 12:00 am
By: News On 6
DETROIT (AP) â€” General Motors Corp. squeezed out a 1 percent increase in earnings for the second quarter, as a variety of higher costs in its automotive business offset growing revenues.
GM earned $1.75 billion, or $2.93 a share, compared to $1.73 billion, or $2.66 a share, from continuing operations in the year-ago period. Including discontinued operations, GM earned $1.92 billion last year.
The results exceeded Wall Street estimates; analysts surveyed by First Call/Thomson Financial were expecting $2.82 a share.
The world's largest automaker said Tuesday its earnings were hurt by investments for new vehicles and services in the United States and Europe, and by losses at Isuzu, of which GM owns 49 percent.
Still, revenues for the three months ended June 30 totaled $48.7 billion, a gain of 8 percent over the year-ago period of $45 billion.
``The bottom line is its a strong quarter,'' said Michael Ward, an analyst with Salomon Smith Barney. ``It's almost like you get tired of seeing it.''
Investors responded by pushing shares of GM up 43.75 cents to $60.813 in trading on the New York Stock Exchange.
Once again, most of GM's earnings came from its North American auto business, even though profits in that sector declined 5 percent, from $1.48 billion to $1.41 billion. GM North America president Ron Zarrella said incentives were not a factor this quarter; prices were unchanged, and GM's revenue per vehicle grew from $18,600 in last year's quarter to $19,400.
Zarrella and Michael Losh, GM's chief financial officer, said the earnings decline was due to the costs of new vehicle programs for North America and investments in OnStar, a subscription safety service GM is building.
GM has committed to revamping its lineup in the next few years as part of a drive to revive its market share. In a report, Merrill Lynch analyst John Casesa counted 26 new models by 2003.
``It's just the timing of where the programs are ... that drives the engineering bill,'' Losh said. He and Zarrella said vehicle development costs should be lower the rest of the year.
Zarrella said incentives and rebates would likely be a factor for the remainder of the year, as industry sales slow down.
As a whole, earnings from GM's automotive operations were down 5.6 percent, from $1.55 billion to $1.46 billion.
Earnings in Europe declined 11 percent, from $187 million in the second quarter of 1999 to $166 million this year. GM said profits were hurt by costs from launching new models and stiff competition.
The company's Asia Pacific division saw its losses grow 52 percent, from $81 million to $123 million. Losh said the region suffered due to a roughly $100 million hit from losses at Isuzu.
GM's Latin America/Africa/Mid-East business turned a $10 million profit after reporting a $38 million loss last year.
GM's other divisions posted improved results, helping the quarter's bottom line. The GMAC finance business earned $395 million, an increase of $4 million. Losses at Hughes Electronics decreased 30 percent, from $92 million to $64 million, mainly due to growth in its DirectTV satellite service.
GM also was able to cut corporate costs by $72 million.
For the first six months of 2000, GM's profits from continuing operations are down 0.5 percent, from $3.55 billion to $3.53 billion. That's despite a 9 percent increase in revenues, from $87.5 billion in the first half of 1999 to $95.6 billion this year.