A $US2.2 billion write-down of its investment in Fiat Auto pushed General Motors Corporation into the red for the third quarter of 2002. GM reported a net loss of $804 million compared with a loss of $368 million in the third quarter of 2001.
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Apart from the Fiat write-down, special items totalling $1.42 billion contributing to the Q3 loss included a $116 million after-tax net charge related to post-employment benefits and asset write-downs as a result of changes in North American production facilities — primarily costs associated with the transfer of commercial truck production from Janesville, Wisconsin, to Flint, Michigan.
GM did however gain $68 million after-tax at its Hughes subsidiary, primarily from the sale of equity interests.
GM’s positive spin on the Q3 result excluded the special items to claim that earnings climbed 30% to $696 million, compared with Q3 2001, due to “strong market performance and aggressive cost reductions at GM North America and continuing strength at General Motors Acceptance Corporation.”
GM said its net liquidity, excluding GMAC and Hughes, increased approximately $700 million from June 30, 2002, to $3.3 billion at Sept. 30, 2002 with automotive operations generating about $600 million of cash flow during the quarter.
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By GlobalDataDebt, excluding GMAC and Hughes, decreased slightly to $14.9 billion at the end of the third quarter of 2002, compared with $15.0 billion at June 30, 2002.
“Strong cash generation is vital to meet the challenges posed by weak returns in the equity markets and the increasing cost of employee benefits that continue to adversely affect GM’s balance sheet,” the company said before revealing that, for the first nine months of 2002, the return on assets held in the US hourly and salaried employee pension funds was approximately -10%.
“The fund performance year to date, combined with other factors, is expected to result in a significant increase in the unfunded status of the pension funds and an increase in 2003 pension expense,” GM said.
Global automotive operations increased 60% to $345 million in Q3 2002.
Income at GM North America (GMNA) increased over 14% to $510 million and production volume was up 5.6%.
Referring to the Detroit Big Three’s current incentive war, GM said: “The pricing environment continued to be challenging, with net price retention totaling -2.2% in the third quarter of 2002. Strong cost performance more than offset the pricing pressures.”
GM’s overall US market share increased by 0.3% in Q3 2002 to 28.0% compared with Q3 2001. Trucks accounted for about 57% of sales in the third quarter, compared with 53% last year.
GM Europe (GME) reported a loss of $180 million in the third quarter of 2002, up from the $287 million loss in Q3 2001.
“Compared with the same period last year, the significant progress in reducing material and structural costs more than offset a decline in vehicle sales and costs associated with the launch of the new Saab 9-3. GME continued to face weak market conditions, particularly in Germany, and a challenging pricing environment,” GM said.
“GM Europe’s turnaround remains a top priority. We’ve made very good progress on the cost side, and now the focus is on improving revenue growth.”
GM Asia-Pacific reported a profit of $76 million in the third quarter of 2002 compared with earnings of $60 million a year ago, led by continued strong performance at Shanghai GM and the Australian Holden unit.
GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $61 million in the third quarter of 2002 compared with a loss of $6 million a year ago. Results were affected by unfavourable economic and market conditions in Brazil, Venezuela and Argentina. On the positive side, GM’s market share in the region increased to 18.2% in the third quarter of 2002, compared with 15.8% in Q3 2001.
GMAC earned $476 million in Q3 2002, up about 9% from a year ago. The increase was largely due to improvements in mortgage operations, resulting from increased volumes and fees.
Hughes lost $81 million in Q3 2002, compared with the $142 million loss in Q3 2001.
General Motors expects total U.S. industry vehicle sales for 2002 will be approximately 17 million units while North American production is forecast at about 1.4 million vehicles in the fourth quarter of 2002, and more than 5.6 million vehicles in calendar year 2002.
For 2003, GM expects moderate economic growth and resulting US industry sales in the mid-to-high-16 million-unit range.
