General Motors 2001 Highlights
FOR RELEASE: July 17, 2001 GM Earns $610 Million, or $1.26 Per Share, In Second Quarter
General Motors 2001 Highlights - Q2 Financial Results
General Motors Consolidated Statements of Income 2nd Quarter '01
Net liquidity improves by $1.4 billion
| Click here for webcast | General Motors 2001 Highlights - Q2 Financial Results |
| General Motors Consolidated Statements of Income 2nd Quarter '01 | |
| Click the above links to view/print the statements (requires program to recognize RTF files, such as Microsoft Word). |
DETROIT — General Motors Corp. today reported that it earned $610 million, or $1.26 diluted earnings per share, in the second quarter of 2001 — excluding special items — on revenues of $46.1 billion.
The second-quarter-2001 results exclude one-time charges totaling $133 million, or $0.23 per share, related to the previously announced restructuring of its affiliate Isuzu Motors Ltd. GM earned $477 million, or $1.03 per share, in the quarter including the charges. GM financial results described throughout the remainder of this release exclude the charges relating to Isuzu unless otherwise noted.
"We had a reasonably solid quarter considering lower North American production to ensure appropriate levels of inventory in the context of moderating industry demand and the prevailing tough pricing conditions," said GM Chairman Jack Smith.
Cash and net liquidity both increased during the second quarter of 2001. Cash, marketable securities, and assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in short-term fixed-income securities, excluding Hughes, totaled $11.1 billion at June 30, 2001, compared with $9.4 billion at March 31, 2001, bringing net liquidity up $1.4 billion, to $1.9 billion.
The second-quarter results compare with record performance in the prior-year period when GM earned $1.8 billion, or $2.93 per share, on revenue of $48.7 billion.
The highly competitive pricing environment in the United States was exacerbated by the strength of the U.S. dollar compared with key European and Asian currencies. The currency exchange rates resulted in a distinct pricing advantage in the United States for European, Korean and Japanese manufacturers who have made significant gains in U.S. market share and increased the pricing pressure on U.S.-based manufacturers.
"We maintained momentum during the quarter as vehicle sales were stronger than expected in North America," said GM Chief Executive Officer Rick Wagoner. "We're moving faster to deliver innovative new products and services and intensifying actions to lower our structural costs."
"We have significantly strengthened our North American product portfolio this year with the introduction of new sport-utility and innovative crossover vehicles that have been well received by our customers and the automotive media," Wagoner said.
GM's product renaissance continued during the second quarter with the production ramp-ups of the Chevrolet Avalanche and TrailBlazer; the Buick Rendezvous; the GMC Envoy; the Oldsmobile Bravada; the Cadillac Escalade; and the Chevrolet Silverado and GMC Sierra heavy-duty pickup trucks. Later this year, GM will launch the Cadillac CTS and EXT models; and the Saturn VUE, strengthening its product lineup even further.
GM is delivering a broader range of new products in other key markets around the world, as well. GM Europe's new products include the Astra convertible; the Speedster; and Vivaro and Combo commercial vans. In Latin America, the Chevrolet Zafira and Grand Vitara are new entries. In the Asia-Pacific region, the Buick Sail; the Chevrolet Blazer; and the S-10 crewcab pickup, which will be introduced later in the year, are important new products in China. The Zafira was recently introduced in Asia-Pacific and is produced at GM's Thailand plant. GM will begin production this fall at Suzuki's Kosai plant in Japan of the new Chevrolet Cruze, a small 4X4 lifestyle vehicle.
Big contributors in the second quarter's financial performance were General Motors Acceptance Corp. (GMAC), and GM North America (GMNA).
GMAC
GMAC earned a second-quarter record $449 million, an increase of more than 13 percent compared with the $395 million earned in the second quarter of 2000. GMAC's results were driven primarily by stronger earnings in its core automotive finance operations. In this segment, the improvement came primarily from higher asset levels and the positive impact of lower short-term interest rates, only partially offset by higher credit losses and lower off-lease residual values.
Insurance operations posted a decline in earnings due largely to a timing-related reduction in capital gains. In the mortgage operations, the lower interest rate environment led to an acceleration of loan prepayments as more customers refinanced their mortgages requiring a write-down of mortgage servicing rights. Absent this write-down, mortgage operations remained strong with a significant increase in mortgage originations and record earnings from GMAC Commercial Mortgage and Residential Funding Corporation (GMAC's residential mortgage conduit operation). Overall, GMAC remains on track for another record year in 2001.
GM NORTH AMERICA
GMNA earned $521 million in the second quarter of 2001 as production fell 13 percent, wholesale vehicle sales declined 12 percent, and net vehicle prices declined approximately 0.8 percent from the prior-year period. GMNA earned $1.4 billion in the second quarter of 2000 when industry demand was at an all-time high. During the second quarter of 2001, U.S. dealer inventories were reduced to less than 1.1 million vehicles, more than 200,000 units below year-end-2000 levels.
In addition, GM outpaced the industry with an 11-percent improvement in quality in the annual J.D. Power and Associates 2001 Initial Quality Study. GM was the highest ranking domestic automaker, with nine vehicles placing among the top three in their categories and three vehicles ranking highest.
GM also was recognized during the quarter for substantial improvements in productivity. The recent annual Harbour report cited an 8.5-percent improvement in GM North America's productivity, outperforming all other multi-plant manufacturers.
"I am especially pleased that the dedicated work of all our employees to improve quality and manufacturing productivity is being recognized and translated into improved results," Wagoner said. "GM's intense focus on quality is having a very positive effect on our products and customers."
GM led all manufacturers in productivity gains in assembly, stamping and engine operations; took the overall lead in transmission productivity for the first time, and had six of the 10 most improved assembly plants in North America. "We've made tremendous progress in productivity and we're working hard to build on that progress, allowing us to further improve our competitiveness in a pricing environment that continues to be aggressive and challenging," Wagoner said.
GM EUROPE
Fierce price competition, and unfavorable product mix and country mix were key factors in GM Europe's (GME) loss of $154 million in the second quarter of 2001. That compares with earnings of $166 million in the second quarter last year.
"The restructuring initiatives announced last year represent only the first step in returning our European operations to solid profitability. GME and our Opel unit have announced that they are aggressively identifying additional actions required to restore profitability and revitalize the Opel/Vauxhall brands," Wagoner said. "We will announce these actions later this year."
OTHER AUTOMOTIVE REGIONS
GM Asia Pacific (GMAP) had net income of $12 million in the second quarter of 2001, excluding GM's portion of the severance payments and asset write-downs that were part of the previously announced restructuring of Isuzu. That compares with a loss of $123 million in the second quarter of 2000. The improvement resulted primarily from decreased operating losses at Isuzu and strong equity earnings from GM's alliance partners Fuji Heavy Industries and Suzuki.
GM's Latin America/Africa/Mid-East (GMLAAM) region had net income of $31 million in the second quarter of 2001, compared with $10 million in the same period last year. The profit improvement was driven primarily by increased volume. The region had its highest market penetration for any quarter in the last 10 years as market share hit 17.8 percent in the second quarter of 2001 – an increase of nearly two percentage points from the same period a year ago.
HUGHES
Hughes' net loss of $156 million in the second quarter of 2001 was related primarily to the continued growth of DIRECTV. Hughes added approximately 200,000 net new DIRECTV subscribers in the second quarter, bringing the total subscriber base to 11.4 million.
LOOKING AHEAD
Sales levels in the first half of 2001 were more robust than initially projected, while some moderation is expected in the second half of the year. GM now expects that total U.S. vehicle sales will be approximately 16.8 million units in calendar-year 2001.
In the European market, sales have moderated from the strong levels last year. GM expects industry vehicle sales in Europe to be in the range of 19 million to 19.5 million units for the calendar year.