General Motors has reiterated its earnings expectations for 2004 but warned of lower profits this year, in part because of higher health care expenses and lower anticipated results at its finance arm.
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According to the Associated Press (AP), GM said it expects 2004 earnings to be in line with its previous guidance of $US6 to $6.50 per share. Fourth-quarter results, scheduled to be reported Wednesday, will include several special items, one of which is a write-off of GM’s remaining $220 million investment in Fiat Auto Holdings – the net result of all special items will be slightly favorable for reported earnings.
The automaker has set a 2005 earnings target of $4 to $5 per share, excluding special items, AP added.
GM reportedly said it hasn’t backed off a goal of attaining annual earnings of $10 per share, but company executives have acknowledged the target has become more difficult given rising health care and pensions costs and other factors.
Vice chairman and chief financial officer John Devine told Associated Press the $10 goal could be achieved as early as 2007 because of a strengthening product portfolio in North America, improved performance in Europe and an expected strengthening of the market in China.
Devine reportedly said 2004 results reflect a strong performance from financial services, record automotive profitability in the Asia-Pacific region and a return to profitability in the Latin American/Africa/Mid-East region.
The Associated Press noted that GM’s financial services subsidiary, General Motors Acceptance Corp., is expected to be a significant contributor to GM’s performance again in 2005, but not to the extent of 2004 – GMAC is forecast to generate net income of at least $2.5 billion in 2005, likely down from record profits in 2004 as a result of higher interest rates.
