GM Expects U.S. Car Sales to Slow in 4th Quarter

Wednesday 11:53 am ET By Newswires

CHICAGO October 15,2003; Ann Keeton writing for Dow Jones reported that Executives at General Motors Corp. said Wednesday they are optimistic that sales momentum in the third quarter can keep its automotive operations in the black through the end of the year.

Still, the company expects total U.S. auto sales to slow in the fourth quarter, to an annual adjusted rate in the "mid-16 million" range, with GM slightly lagging behind the industry.

The company increased its U.S. market share to 28.7% in the third quarter, on a stronger product mix, and said U.S. business next year should get a boost with the introduction of 17 vehicles and the improving U.S. economy.

The world's largest auto maker told analysts during a conference call that it continues to make progress in cost cutting. GM expects its huge pension obligations to be almost fully funded by the end of 2003. It will add nearly $20 billion in cash to the funds by the end of this year.

Earlier Wednesday, GM reported third-quarter net income of 79 cents a share, substantially better than the 66 cents expected by a consensus of analysts reporting to Thomson First Call .

In the third quarter of last year, GM lost $1.42, including special items. The company said there were no special items in the most recent quarter.

Third-quarter net sales and revenue rose 5.4% to $45.9 billion.

Earnings at the GMAC financing unit jumped 30% in the quarter, to $630 million. As expected, that growth slowed from the first half of the year. But, it represented a continued strong performance from mortgage and other businesses, chief financial officer John Devine told analysts.

In its auto business, GM said North American business was "marginally profitable," making $128 million in the quarter. Profits in Asia-Pacific nearly doubled, to $162 million, led by growth at Shanghai GM. GM Chairman and Chief Executive Rick Wagoner said he sees continued growth in the region as a result of joint ventures in China and South Korea.

European operations continued to report a loss, which Devine said was largely driven by unfavorable currency exchange. The company also sees a loss in the fourth quarter but said that aided by cost-cutting and new products, it believes it can get Europe into the black in 2004.

GM executives said the company's new contract with the United Auto Workers union will save costs, but that with inflation, employee health-care expenses in 2004 are likely to rise in a range of 8% to 8.5%, comparable to an expected increase of 8% this year.

GM reaffirmed its plans to close plants in Baltimore and Saginaw, Mich., and downsize others, though there is no timetable for those plans. Overall, negotiations in the new contract will help GM to reach 100% capacity utilization by mid-decade.

Mr. Devine, the company's CFO, said GM should be able to keep capital spending below $7 billion this year.

The company expects to complete the sale of its Hughes unit in the fourth quarter, or early next year at the latest. The sale will bring the total amount of cash raised this year to $25 billion, the bulk of which will be used for pension funding.

GM said pension assets have returned 14% year to date. For next year, the company is maintaining an expected return on assets of 9%.