GM Outlines Objectives For 2003

$5.00 earnings per share, excluding Hughes and special items $10 billion cash generation Improved market share in all regions

DETROIT - General Motors Corp. today said it is pursuing a strategy to generate long-term profitable growth through its continued worldwide product offensive, and by further leveraging the strength of its product development, manufacturing, purchasing, quality and distribution capabilities.

"GM’s long term strategy for creating stockholder value is clear. We’re focused on executing a global plan to win more market share, improve our profitability, and capitalize on new opportunities to grow our automotive business in both developed and emerging markets," said GM President and Chief Executive Officer Rick Wagoner, at a meeting of securities analysts and institutional investors during the North American International Auto Show here.

"We’re achieving solid operational improvements by leveraging our strengths in product development, manufacturing, purchasing, quality and our global sales footprint. Over the last several years, GM has demonstrated steady and significant improvement in our core operations. We have developed an extremely strong position in trucks and sport utility vehicles, and embarked on a remarkable resurgence at Cadillac," Wagoner said. "Additionally, we’ve established important and solid footprints in key growth markets such as China and Korea. "In 2003, we’re going to pick up the pace and build on our excellent operating base to capitalize on market opportunities around the globe," Wagoner said. "We know what to do and we’re planning to ‘go fast’ in accomplishing our objectives."

GM Vice Chairman and Chief Financial Officer John Devine outlined the company’s 2003 financial goals. This year, GM expects to earn $5.00 per share of GM $1-2/3 par value common stock, excluding Hughes and special items, generate $10 billion in cash and improve market share in all four automotive regions.

"The key to achieving these goals is great products," said Devine. "Our increasingly competitive products and cost structure will position us for long-term improvement in our financial performance."

GM North America is expected to earn approximately $1.7 billion to $1.9 billion in 2003, and GM Europe is expected to report improved financial results, in a range of break-even results to a loss of about $200 million.

GM expects 2003 industry sales to be down modestly in the North American and European markets, at 19.4 million and 19.0 million respectively; up again in the Asia Pacific region at about 15.0 million units; and unchanged in the Latin America Africa Mideast region at 3.7 million units.

"Pricing pressures are expected to continue in the North American and European markets in 2003," Devine added.

GM will continue to support its product offensive with total capital spending of about $7 billion in 2003. Net material cost reduction for GM North America is targeted at 3.0 percent, and for GM Europe at 3.5 percent. For North America and Europe, GM is also targeting carryover structural cost, excluding pension expense, reflecting strong cost performance that will effectively offset increases in health care expense and economics. The strong material and structural cost performance expected in 2003 is on the heels of strong performance in 2002.

GMAC expects another record profit in 2002, marking the eighth consecutive year of earnings growth at the wholly owned finance subsidiary. For 2003, GMAC expects another year of strong results, with net income targeted at $1.7 billion to $1.9 billion. In addition, GMAC’s goal for 2003 is to again remit a dividend to GM while maintaining its funding-to-equity leverage ratio roughly in line with current levels. GMAC paid a $400 million dividend to GM during the fourth quarter of 2002.

Strengthening GM’s balance sheet continues as a priority in 2003. A significant factor affecting GM’s 2003 financial performance will be increased pension expense, which is expected to rise to about $3 billion in 2003, before tax, from about $1 billion before tax in 2002. Strong cash generation in 2002 allowed GM to contribute a total of $4.8 billion to its U.S. pension plans during the year, including a $2.6 billion cash contribution in the fourth quarter.

A preliminary analysis of GM’s U.S. pension plans showed that the plans’ underfunded status was approximately $19.3 billion at the end of 2002, based on a 2002 asset return of approximately negative 7 percent, and a discount rate of 6.75 percent. The discount rate, which is used to calculate the present value of future pension liabilities, was reduced from 7.25 percent in 2002. GM’s U.S. pension plans were underfunded by $9.1 billion at the end of 2001. Based on a comprehensive study by GM’s asset managers and actuaries, GM has decided to reduce its asset earnings rate assumption to 9 percent in 2003 from 10 percent in 2002.