GM 3Q Profitable; BUT Automotive Earnings Down Sharply

DETROIT October 15, 2003; John Porretto writing for the AP reported that General Motors Corp. earned $425 million in the third quarter, in contrast to a loss of $804 million a year ago, but automotive earnings fell sharply because of intense pricing pressure in North America and unfavorable exchange rates overseas.

The world's biggest automaker said Wednesday its profit amounted to 79 cents a share in the July-September period, easily beating the consensus of 66 cents a share of analysts surveyed by Thomson First Call. The company said it expects to exceed its original 2003 earnings target of $5 a share.

A year ago, GM posted a loss of $1.42 a share in the third quarter, when one-time expenses totaled $1.42 billion, or $2.62 a share. That included a $1.37 billion expense related to GM's investment in Fiat Auto Holdings. GM had no special charges in the third quarter of 2003.

Revenue rose 5.4 percent to $45.9 billion from $43.6 billion a year ago.

The figures include results from GM's Hughes Electronics satellite television business, which the automaker is selling to Rupert Murdoch's News Corp.

Excluding results from Hughes, GM earned $448 million, or 80 cents a share, in the quarter, compared with $696 million, or $1.24 a share, a year ago. The year-ago figure also excludes one-time charges.

"On balance, General Motors posted solid business results despite ongoing pricing pressure, lower production volumes and increased pension and health care costs," Rick Wagoner, GM chairman and chief executive, said in a statement.

But earnings from GM's global automotive operations dropped dramatically to $34 million from $368 million a year ago.

In North America, GM earned $128 million, down from $533 million in the year-ago period. The company said improvements in sales mix and other factors were offset by costly consumer incentives, a 5 percent decline in production and increased pension and health care expenses.

GM said its U.S. market share rose to 28.7 percent in the quarter, compared with 28 percent in the same period last year and 27.9 percent in the second quarter of 2003. Still, GM's U.S. sales through September were down 3.1 percent from the first nine months of last year.

GM Europe narrowed its loss in the quarter to $152 million from $180 million a year ago.

The company's financing business continued to post strong results, spurred by mortgage operations. GMAC earned $630 million in the third quarter, a 30 percent increase from the third quarter of 2002.

Hughes reported a loss of $23 million in the third quarter, compared with a loss of $81 million in the year-ago period.

For the first nine months of the year, GM earned $2.8 billion, or $5.08 a share, versus $716 million, or $1.63 a share, a year ago. Revenue rose to $143.6 billion from $138.2 billion.

The automaker also reported it contributed $5.5 billion to its U.S. pension plans in September and another $8 billion in early October, bringing its year-to-date contributions to $14.4 billion.

As a result, the company revised its anticipated 2003 pretax pension expense from $2.8 billion to $2.6 billion. GM's pension liabilities have been a concern among investors and a drag on its earnings.