General Motors on Wednesday reported net income of $US1.5 billion, or $2.71 per share, for the first quarter of 2003, up from $228 million, or $0.57 per share, in the first quarter of 2002.
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GM’s adjusted income, which excludes a gain from the sale of GM Defence and results from Hughes Electronics, totalled $1 billion, or $1.84 per share, in the first quarter of 2003. GM’s adjusted net income in the first quarter of 2002 was $791 million, or $1.39 per share. Automotive and financing revenue rose about 5%.
The only bad News in the first quarter results announcement was the GM Europe (GME) loss of $65 million though even that was a substantial improvement from a year ago when GME posted a loss of $125 million. GM said the improvement reflected increased volume for GME as new Opel and Saab products reached the market. In addition, GME also made significant progress in cost reduction at Opel/Vauxhall and Saab.
Similarly, GM Latin America/Africa/Mid-East (GMLAAM) lost $12 million in the first quarter of 2003, but that again was an improvement compared with a loss of $40 million a year ago.
In a statement, GM said its performance in the first quarter of 2003 reflected profitable automotive operations in North America, significantly improved results in Europe and Asia, record earnings at General Motors Acceptance Corp. and continued strong automotive cash flow.
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By GlobalDataThe first-quarter 2003 results include a gain of $505 million after tax, or $0.90 per share, from the previously announced sale of GM Defence. The first-quarter 2002 results included unfavourable special items totalling $417 million, or $0.72 per share.
Cadillac sales increased 16% in the first quarter of 2003 and Saab Cars USA reported the best quarterly sales results in its 47-year history.
GM generated approximately $3.3 billion in automotive cash in the first quarter of 2003, including approximately $1.1 billion from the sale of GM Defense. Cash, marketable securities, and assets of the VEBA trust invested in short-term fixed-income securities totaled $20.6 billion at March 31, 2003, excluding financing and insurance operations and Hughes, compared with $17.3 billion on Dec. 31, 2002. The increase in cash improved GM’s net liquidity to $5.6 billion at the end of the first quarter of 2003 versus $2.3 billion at the end of 2002.
As previously announced, GM contributed 149.2 million shares of GM Class H stock, valued at $1.24 billion, to its US employee benefit plans in the first quarter of 2003 to further strengthen GM’s balance sheet.
GM’s global automotive operations earned $546 million in the first quarter of 2003, compared with $496 million in the prior-year period. Global production rose 7% in the first quarter, compared with the same period in 2002.
GM North America (GMNA) earned $548 million in the first quarter of 2003, compared with $654 million in the first quarter of 2002. GM claimed improvements in sales mix, material cost, and productivity in North America, but the gains were more than offset by intense pricing pressure, higher pension expense, and currency exchange losses versus the year-ago period. GM’s US market share was 26.6% in the first quarter of 2003, down from 28.2% in the year-earlier period.
GM Asia Pacific earned $75 million in the first quarter of 2003, up from $7 million in the year-ago quarter. Shanghai GM and GM’s Australia-based Holden continued to post strong financial results. Asia-Pacific results also benefited from lower-than-expected start-up costs at GM Daewoo Auto & Technology Co.
GM Latin America/Africa/Mid-East (GMLAAM) lost $12 million in the first quarter of 2003, compared with a loss of $40 million in the year-ago period.
“GM turned in a strong performance overall during the first quarter,” GM president and CEO Rick Wagoner said. “I’m particularly pleased with the record-breaking performance at GMAC, the continued strength of our Asia-Pacific operations, and the growing momentum behind GM Europe’s turnaround.
“While market conditions were admittedly challenging, market share performance in North America did not meet our expectations. We are launching new products in key, high-volume segments of the market to improve our competitiveness, and we expect to remain aggressive in the marketplace. At the same time, we must continue to build on our tremendous progress in improving quality and reducing costs around the globe.
“We’re pleased with the continuing progress of our turnaround effort at Opel/Vauxhall, and we’ve made good progress at Saab in a relatively short period of time,” Wagoner added. “During the first quarter of 2003, GM Europe increased its market share to 9.6%, representing six consecutive months of market share gains in Europe. In addition, Saab reported impressive sales in its key markets, so we feel we’re on the right track in Europe.
“GM’s Asia-Pacific operations are a growing contributor to our overall performance,” Wagoner said. “Our joint ventures in China are expanding rapidly, and GM Daewoo is performing better than we had planned. While the Latin American market remains difficult, we are continuing to increase our market share and strengthen our number one position in the region, and reduce costs.”
General Motors Acceptance Corporation (GMAC) reported record quarterly earnings in the first quarter of 2003, propelled by record performance at its mortgage operations.
GMAC earned $699 million in the first quarter of 2003, up nearly 60% from the $439 million a year ago. Earnings at the mortgage group rose to a record $371 million, more than double the $148 million recorded in the first quarter of 2002. The improvement reflects continued strong volumes at both the residential and commercial mortgage sectors.
GMAC’s financing operations also posted a strong performance with earnings of $302 million in the quarter, up $47 million from a year ago, reflecting higher asset levels and lower credit loss provisions. First quarter earnings at the insurance group were $26 million, down $10 million from a year ago. These results reflect a decline in the investment portfolio, which more than offset improved underwriting income.
Hughes Electronics reduced its losses substantially during the first quarter of 2003 to $54 million from a loss of $146 million in the prior-year period, led by a strong performance at DirecTV.
As a result of the improved performance at DirecTV, Hughes reported an operating profit of nearly $42 million in the first quarter of 2003, the first time Hughes has generated a quarterly operating profit in over four years.
GM recently announced that it plans to split off Hughes and simultaneously sell its 19.9% economic interest in Hughes to News Corp. for $14 per share, or approximately $3.8 billion. GM would receive about $3.1 billion in cash, and the remainder would be paid in cash or News Corp. preferred American Depositary Receipts (ADRs).
GM would also receive a distribution of $275 million from Hughes in consideration of the value enhancement for Class H stockholders arising from the conversion from a tracking stock to an asset based stock. The transaction is expected to close in late 2003 or early 2004.
GM expects moderate economic growth in 2003 in the United States, resulting in total US industry vehicle sales in the low to mid-16 million unit range. In Europe, total industry vehicle sales are expected to be in the high 18-million unit range.
Although there is considerable economic uncertainty and increasing price and volume pressure, GM expects second quarter earnings of at least $1.00 per share, excluding Hughes and any special items. GM expects to be profitable in both the third and fourth quarters of 2003. However, GM is now less certain of its ability to achieve its prior 2003 calendar-year guidance of $5.00 earnings per share, given the uncertain economic conditions around the globe.
