General Motors on Tuesday reported 2003 net income of $US3.8 billion, or $7.14 per share, compared with $1.7 billion, or $3.35 per share, in 2002. Revenue rose 4.6% to $185.5 billion from $177.3 billion in 2002, which is restated to exclude Hughes Electronics. Adjusted income, excluding special items and results from Hughes Electronics, totalled $3.2 billion, or $5.62 per share, in 2003, compared with $3.9 billion, or $6.98 per share in 2002.
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Fourth Quarter 2003
For the fourth quarter of 2003, GM reported consolidated net income of $1.0 billion, or $2.13 per share, compared with $1.0 billion, or $1.71 per share, in the Q4, 2002. Revenue rose 7.7% to $49.1 billion from $45.6 billion in the fourth quarter of 2002.
Excluding special items and Hughes, GM earned $838 million, or $1.47 per share, in the fourth quarter of 2003, compared with $934 million, or $1.67 per share, in the year ago period.
GM’s fourth quarter-2003 results reflect various special items with a net favourable effect of $339 million, or $0.72 per share. These special items include a net gain of $1.2 billion associated with the split-off of Hughes Electronics from GM and related sale of Hughes stock to News Corporation, and a positive adjustment of $103 million to previous accruals for excess employees at certain North American facilities. These items were partially offset by a charge of $725 million for the cost of lump sum payments and vehicle discount vouchers to retirees as provided for in the 2003 United Auto Workers (UAW) labour contract, and additional restructuring actions at GM Europe totaling $218 million.
Year in Review
“GM reported solid overall results in 2003, reflecting strong contributions from GMAC and our Asia Pacific automotive operations,” said chairman and chief executive officer Rick Wagoner.
GM generated more than $32 billion in cash in 2003, about three times the company’s original target, including more than $10 billion in cash from automotive operations, as well as proceeds from non-core asset sales and global debt offerings.
The strong cash performance enabled the company to contribute a total of $18.5 billion to its US pension plans and $3.3 billion to the Voluntary Employees’ Beneficiary Associated (VEBA) Trust for retiree health-care benefits in 2003. GM contributed an additional $2.4 billion to the VEBA Trust in January 2004.
“These moves considerably strengthened our balance sheet, and enabled us to end the year with our combined US hourly and salaried pension plans fully funded,” Wagoner said. “This was a remarkable accomplishment considering that these plans were nearly $18 billion underfunded at the start of 2003.”
Automotive Operations
Global automotive operations earned $396 million in the fourth quarter of 2003, compared with $574 million in the year-ago quarter, excluding special items. The fourth quarter-2003 results reflected sharply higher profits in the company’s Asia Pacific operations, reduced losses in Europe, lower income in North America, and increased losses in Latin America. For all of 2003, GM’s automotive operations earned $1.1 billion, compared with $2.6 billion in 2002. The deterioration in profitability is partially attributable to higher pension and health-care costs in the US.
GM North America (GMNA) earned $397 million in the fourth quarter of 2003, compared with $644 million in the year-ago period, as lower production volumes and higher pension and health-care costs were partially offset by strong cost performance and favourable mix. For 2003, GMNA earned $1.2 billion, down from $3.1 billion in 2002.
Despite strong gains in the second half of the year, GM’s share of the US market in 2003 was 28.0% compared with 28.3% in 2002.
“While overall market share was down, we were pleased with our sales momentum in the second half of 2003 when our market share was 28.7%,” Wagoner said. “As we continue our aggressive new-product cadence, we are optimistic about increasing market share in 2004.
“Over the last few years, we have significantly improved the quality and competitive position of our vehicles,” Wagoner added. “This trend continued in 2003 with Cadillac leading the way. There’s still more to do, but we believe our cars and trucks are beginning to change consumer perceptions.”
GM Europe reported a loss of $66 million in the fourth quarter of 2003, compared with a loss of $129 million a year ago as continued material and structural cost reductions were partially offset by foreign-exchange losses, continued price pressure and unfavourable mix. For 2003, GME had a loss of $286 million, an improvement from the $549 million loss in 2002.
“While we’re disappointed that we fell short of our financial targets in Europe, we continue to make good progress on cost reduction,” Wagoner said. “In 2004, we expect to improve our operating performance as we launch new models such as the Opel Astra, Vectra wagon and a new, small convertible.”
GM Asia Pacific (GMAP) earned $177 million in the fourth quarter of 2003, a significant improvement from year-ago earnings of $66 million. Continued strong performance by Shanghai GM in China and Holden in Australia, together with improved results from GM’s equity alliances, contributed to GMAP’s performance. For all of 2003, GMAP earned $577 million, more than three times the net income of $188 million in 2002.
GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $112 million in the fourth quarter of 2003, compared with a loss of $7 million in the year-ago period. For all of 2003, GMLAAM reported a loss of $331 million, up from a loss of $181 million in 2002. Results for 2003 in Latin America were negatively affected by weak economic conditions and an asset write-down in Brazil.
GMAC
The GMAC finance arm reported record fourth-quarter income of $630 million in 2003, up 20% from the $524 million earned in the fourth quarter of 2002. All three of GMAC’s business units – financing, insurance and mortgage operations – reported improved results during the quarter.
For calendar year 2003, GMAC posted another record year with income of $2.8 billion, compared with $1.9 billion in 2002. Earnings from financing operations improved as lower credit provisions offset the negative impact of narrower net-interest margins. Insurance operations benefited from higher underwriting income and a reduction in capital losses related to its investment portfolio. Income from mortgage operations more than doubled, reflecting record originations in both the residential and commercial mortgage sectors.
Profit Sharing
General Motors also announced that its approximately 125,000 hourly employees in the United States will receive a profit-sharing payment in 2004. A typical US hourly employee, eligible under the profit-sharing programme, would qualify for a payment of approximately $170.
The Year Ahead
GM expects global motor industry sales to rise about 3% in 2004 to a record 60 million vehicles. In the United States, GM expects total US industry vehicle sales of approximately 17.3 million and expects robust industry growth in Asia Pacific with moderate growth in Europe and the LAAM region.
GM expects to generate $5 billion in operating cash in 2004 and estimates that earnings in the first quarter of 2004 will be approximately $1.75 per share, excluding any special items.
For the 2004 calendar year, GM’s earnings target is $6.00 to $6.50 per share, excluding special items.
