From The Horses Mouth: GM Increases Earnings, Production Estimates

NEW YORK -- General Motors Corporation today raised its estimates for 2002 first quarter and calendar-year earnings and production schedules, reflecting better-than-expected industry sales in the U.S. and strong retail sales of GM vehicles.

GM Vice Chairman and Chief Financial Officer John Devine said the revised outlook comes as GM is taking steps to strengthen its balance sheet by $10 billion in 2002 through a combination of improved cash flow, dividends from GMAC stemming from its anticipated earnings strength, proceeds from the proposed split-off and merger of Hughes, and public offerings.

The proceeds of the cash-generation initiatives will be used to rebuild GM's liquidity position, reduce its underfunded pension liability, and fund its post-retirement health care obligations.

"Our revised expectations reflect the increased optimism we have about our near-term performance, and the confidence we have about the future," Devine said. "We can strengthen the balance sheet by capitalizing on the momentum we're creating in market share, quality, productivity, and new product offerings, including the Saturn Vue and Cadillac CTS."

Devine noted that the long-term outlook for GM is increasingly positive. "It is reasonable to expect that GM could generate $10 per share in earnings by the middle of the decade," he said, adding GM expects to achieve this earnings target through a combination of aggressive cost-cutting, improved volume and mix in North America, improved earnings in Europe, Asia and Latin America and solid financial performance from GMAC.

GM's current outlook for first quarter earnings per share is now $1.20, excluding Hughes and any special charge related to GM's restructuring of its European operations under its Project Olympia. Previously, GM's estimate for the first quarter, excluding Hughes and any European restructuring charge, was $1.00 per share.

GM's revised estimate for calendar year 2002 is now $3.50 per share, excluding Hughes and any European restructuring charge. The increase of $0.50 per share from the previous estimate is mostly attributable to expected increases in production volume to meet better-than-expected retail vehicle demand in the U.S.

GM is increasingly optimistic about the U.S. industry outlook and now expects total U.S. industry sales of approximately 16 million vehicles for the year.

As a result of the stronger industry sales outlook and GM's performance in the retail market, GM is increasing its first quarter North American production estimate by 20,000 vehicles, to 1,340,000 units. This revised estimate is 10 percent above last year's first quarter production of 1,214,000 vehicles.

For the second quarter of 2002, GM estimates that its North American production will be approximately 1,425,000 units (605,000 cars and 820,000 trucks), up over 4 percent from 1,364,000 units last year. GM's North American production for the first half of 2002 will be up 187,000 units, or 7 percent compared to last year. For the full year, GM expects to produce more than 5.1 million vehicles in North America, up more than 100,000 units from the company's estimate in January