GM Earns $1.3 Billion or $2.36 Per Share in Second Quarter 2004

GMAC posts record quarterly earnings, driven by financing and insurance Automotive earnings increase to $529 million Calendar year earnings forecast of $7.00 per share remains unchanged

CLICK4 General Motors Consolidated Statements of Income 2nd Quarter '04

DETROIT July 21, 2004; General Motors Corp. today reported earnings from continuing operations of $1.3 billion, or $2.36 per diluted share, in the second quarter of 2004. These results compare with earnings of $879 million, or $1.57 per share, in the second quarter of 2003. Revenue rose 7.1 percent to $49.1 billion.

“Overall, our financial results for the quarter were reasonably good,” said GM Chairman and Chief Executive Officer Rick Wagoner. “General Motors Acceptance Corp. once again had an outstanding quarter, setting another record, and our automotive operations reported improved earnings as well. But competition in the global automotive market remains very intense, and we still have much work to do to improve our automotive profitability to targeted levels.”

GM financial results described throughout the remainder of this release exclude special items and discontinued operations unless otherwise noted. See Highlights for reconciliation of adjusted results to results based on Generally Accepted Accounting Principles (GAAP).

GMAC GMAC earned a record $860 million in the second quarter of 2004, up from $834 million in the year-ago period.

“We’re very pleased with GMAC’s record-breaking performance,” Wagoner said. “GMAC continues to do an outstanding job managing its global portfolio of businesses. Its auto-financing business, in addition to supporting GM sales, is turning in strong profitability around the globe. Insurance earnings are strengthening, and mortgage earnings, while understandably lower, still remain solid.”

Earnings from GMAC’s financing operations rose 14 percent to $452 million in the second quarter, up from $396 million a year ago, as lower credit losses and improved lease-residual values more than offset narrower net-interest margins.

Second-quarter earnings at the insurance group were $75 million, a significant improvement from earnings of $23 million a year ago, reflecting continued growth in underwriting income and improved performance in the investment portfolio in 2004.

Earnings from the mortgage unit totaled $333 million, compared with record year-ago earnings of $415 million. As expected, lower mortgage volume and decreased pricing margins were somewhat offset by higher asset levels. Despite the decline in second-quarter earnings, GMAC’s mortgage unit continues to be a significant contributor to GMAC’s overall performance.

GM Automotive Operations GM’s global-automotive earnings totaled $529 million in the second quarter of 2004, up from $140 million in the prior-year period, reflecting improved earnings in North America, Asia Pacific, and the Latin America/Africa/Mid-East region, partially offset by increased losses in Europe. In the second quarter, GM’s market share was up in three out of four regions of the world; global share totaled 14.7 percent, down from 14.9 percent in the year-ago period. For the six months ended June 30, 2004, GM’s market share was also up in three out of four regions, and totaled 14.1 percent, compared with 14.2 percent in the year-ago period.

GM North America (GMNA) earned $328 million in the second quarter of 2004, compared with earnings of $83 million in the second quarter of 2003. Improvements in material costs and pricing more than offset less-favorable mix and higher recall costs. GM’s market share in North America was 26.2 percent in the second quarter of 2004, compared with 27.2 percent in the year-earlier period. For the six months ended June 30, 2004, GM’s market share in North America was 26.3 percent, versus 26.7 percent in the year-ago period.

“While earnings at GM North America improved, overall sales, market share and financial results were well below our expectations. For sure, the competition is tough, but we also must move faster to implement our strategy -- introducing great cars and trucks, reducing costs, improving quality, and generating cash,” Wagoner said. “There were some bright spots in the quarter, such as our strong performance in recent quality and productivity surveys, and the market reception of new vehicles, like the Chevrolet Equinox and the Cadillac SRX.”

GM’s quality and productivity gains were recognized during the second quarter by two major independent surveys. According to the 2004 J.D. Power and Associates Initial Quality Study, GM recorded a 10-percent improvement in initial quality overall, with Cadillac emerging as the top luxury-car brand. GM also continued its steady improvement in manufacturing productivity. In the recently released Harbour Report North America 2004, GM posted a 5.2-percent improvement in North American manufacturing productivity in 2003, bringing GM’s overall improvement over the last six years to more than 24 percent.

“We’ve had a decade-long focus on improving our quality and manufacturing productivity, and with the great work of our employees and labor unions, we’re now reaching industry-leading performance in many categories and plants,” Wagoner said. “That’s something we’re proud of, but the fact is that we’ve still got more to do in this area in order to offset our high-cost manufacturing footprint and the huge burden of legacy costs that we carry.”

GM Europe (GME) reported a loss of $45 million in the second quarter of 2004 compared with a loss of $3 million in the year-ago quarter. The most recent quarter’s results reflect intense price competition, foreign-exchange losses and continuing restructuring costs for GM’s share of the GM-Fiat powertrain joint venture, partially offset by continuing cost improvements. GM’s market share in Europe rose to 9.8 percent in the second quarter of 2004 from 9.4 percent in the year-ago period. For the six months ended June 30, 2004, GM’s market share in Europe was 9.6 percent, up from 9.5 percent in the year ago period.

"Our European operations are making significant progress in reducing costs and improving quality,” Wagoner said. “However, despite growing market share, we’re not getting the revenue growth that we had hoped for, particularly in the traditionally large western European markets. So, that means we have to pick up the pace in new-model introductions, while we simultaneously reduce costs. That’s a tough assignment, and it’s going to require GME to do a better job of leveraging our global resources to bring new products to market faster and at lower cost.”

GM Asia Pacific (GMAP) earned $236 million in the second quarter of 2004, up from $163 million in the year-ago quarter. Continued strong performance by Shanghai GM in China, improved earnings in India and Thailand, and smaller losses at GM-Daewoo Auto & Technology Co. (GMDAT) contributed to GMAP’s overall performance. GM’s market share in the Asia Pacific region rose to 5.4 percent in the second quarter from 4.8 percent a year ago, led by gains in China and India. Through the first six months of 2004, GM’s market share in the Asia Pacific region was 5.0 percent, up from 4.6 percent in the comparable period a year ago.

“GMAP registered another great quarter, growing sales, market share and profitability,” Wagoner said. “For example, in the first six months of 2004, GM sales in China rose 58 percent and GM continued to gain share in Thailand and India. We expect continued strong growth in Asia, and we plan to stay aggressive and capitalize on our momentum.”

Wagoner also pointed out recently announced plans to invest $3 billion in China over the next three years with GM’s joint-venture partners. “This investment will further strengthen GM’s already solid position in China by expanding our capacity and broadening GM’s product portfolio with the introduction of the Cadillac brand.”

GM Latin America/Africa/Mid-East (GMLAAM) earned $10 million in the second quarter of 2004, a significant improvement from the year-ago loss of $103 million. This year’s results reflect higher production volumes and improved earnings in Venezuela and South Africa. GM’s market share in the GMLAAM region rose to 17.4 percent in the second quarter of 2004 from 15.6 percent a year ago. For the six months ended June 30, 2004, GM’s market share in the LAAM region was 17 percent, up from 15.6 percent in the year-ago period.

“We’re pleased with the improving performance of GMLAAM,” Wagoner said. “Our market share continues to be impressive and we reported a profit for the second consecutive quarter.”

Cash and Liquidity GM generated approximately $1.2 billion in automotive cash in the second quarter of 2004. For the six months ended June 30, 2004, total automotive cash generated by GM stood at $2.6 billion. Cash, marketable securities, and short-term assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaled $25 billion at June 30, 2004, excluding financing and insurance operations, compared with $23.5 billion on March 31, 2004.

Looking Ahead GM expects total U.S. industry sales of approximately 17.2 million vehicles in calendar year 2004, reflecting strengthening labor markets and increases in household income. Through the first six months of 2004, industry sales came in at an annualized rate of around 16.9 million units.

For the third quarter of 2004, GM expects to earn approximately $0.75 to $1.00 per share, excluding special items and at current dilution levels. GM’s 2004-calendar-year earnings estimate remains unchanged at approximately $7.00 per share, excluding special items and at current dilution levels