General Motors today reported that it came close to tripling fourth quarter profit and achieved record revenues while doubling profits for the full calendar year.
CALENDAR YEAR 2002
GM earned $US1.7 billion on record revenue of $186.8 billion, or $3.35 diluted earnings per share compared with $601 million, or $1.77 per share, in 2001.
Excluding special items and Hughes, 2002 earnings reached $3.9 billion, or $6.98 per share, nearly double the results in 2001 when GM earned $2.0 billion, or $3.60 per share.
FOURTH QUARTER 2002
Earnings totalled $1.0 billion on record quarterly revenue of $48.7 billion, or $1.71 per share. That compares with $255 million, or $0.60 per share, in the prior-year period. There were no special items other than those at Hughes in the fourth quarter of 2002.
Excluding Hughes and its special items, earnings in the fourth quarter of 2002 totaled $934 million, or $1.67 per share, more than double the $386 million, or $0.69 per share, earned in the prior-year period.
YEAR IN REVIEW
GM’s automotive operations generated approximately $8 billion in cash flow, as total cash generation was about $12 billion in 2002, exceeding the target of $10 billion.
“We generated significantly more cash than expected,” CEO Richard Wagoner said. “This was achieved despite the fact that the Hughes transaction, which had been a major element of our cash-generation plan, could not be completed. And, we still have a significant store of value in Hughes that we can capitalise on going forward.”
The strong cash performance allowed GM to contribute a total of $4.8 billion to its US pension plans during the year, including a $2.6 billion cash contribution in the fourth quarter. In addition, GM made a $1 billion cash contribution to the long-term Voluntary Employees’ Beneficiary Association (VEBA) Trust in June of 2002. Even with these contributions, net liquidity of $2.3 billion at year-end 2002 was up $1.3 billion from year-end 2001.
GM AUTOMOTIVE OPERATIONS
GM’s global automotive operations earned $563 million in the fourth quarter of 2002, compared with $66 million in the prior-year period. The increase was fuelled by income growth at GM North America (GMNA) and Asia Pacific, and moderating losses in Europe and Latin America. For 2002, GMNA earned $3.0 billion, double its 2001 performance.
GM’s US market share increased to 28.3% for the year, up 0.2% from 2001.
The company described the “pricing environment” as “challenging”, with vehicle prices continuing to decline in North America. Net price retention was negative 3.2% in the fourth quarter of 2002, and negative 2.1% for the year. Higher production volume and significant improvements in structural and material costs more than offset the continued pricing pressures, leading to more than a 50% improvement in GMNA’s fourth-quarter net income compared with the same period in 2001. Year-end dealer inventories were well positioned at slightly more than a million units.
GM Europe (GME) reported a loss of $129 million in the fourth quarter of 2002, an improvement from the $240 million loss in the year-ago period. Significant progress in reducing material and structural costs and increased volume were partially offset by higher losses at Saab. For 2002, GME had a loss of $549 million, compared with a loss of $767 million in 2001.
“We’ve made very good progress on the cost side in Europe, and we continue to focus on revenue growth,” Wagoner said. “We’ve mounted a major product offensive and expect the new Opel/Vauxhall and Saab models, along with expanded diesel engine availability, to drive increased sales. We’re pleased with the progress we’re making in turning around our Opel/Vauxhall operations, and we are intensifying our efforts to cut costs and improve sales at Saab.”
GM Asia-Pacific (GMAP) reported a profit of $66 million in the fourth quarter of 2002 compared with earnings of $25 million a year ago, led by continued strong performance at GM’s Australia-based Holden and Shanghai GM in China. The earnings also reflect better-than-expected results from GM’s equity alliances. The fourth-quarter-2002 results included GM’s share of start-up related losses at GM Daewoo Auto & Technology Co., which totalled approximately $50 million. For 2002, GMAP earned $188 million, compared with $77 million in 2001.
GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $7 million in the fourth quarter of 2002, a significant improvement versus its loss of $111 million in the year-ago quarter. Results there were negatively affected by the general economic downturn in the region and turmoil in Venezuela and Argentina. For 2002, GMLAAM had a loss of $181 million, compared with a loss of $80 million in 2001.
GMAC earned $524 million in the fourth quarter of 2002 — an all-time fourth-quarter record. These results represent an increase of more than 20% from fourth-quarter earnings of $435 million a year ago, with the improvement driven by strong results from automotive finance and mortgage operations. For 2002, GMAC earned an all-time record $1.9 billion, compared with $1.8 billion in 2001.
GM expects moderate economic growth in 2003 in the United States, resulting in total US industry vehicle sales of approximately 16.5 million units. In Europe, total industry vehicle sales are expected to be about 19 million units. GM’s 2003 first-quarter production forecast for North America is now estimated at 1.43 million units, up nearly 6% from the first quarter of 2002.
GM estimates that earnings in the first quarter of 2003 will be approximately $1.50 per share, and the calendar-year earnings target is approximately $5.00 per share, excluding Hughes and any special items. In the fourth quarter of 2002, GM’s effective income-tax rate, excluding financing and insurance operations, was 26%, the level expected for GM in each of the next several years.