General Motors on the whole today surged back into third-quarter black ink as it reported net income of $US425 million, or $0.79 per share for the third quarter of 2003, compared with a net loss of $804 million, or $1.42 a share, in the third quarter of 2002. Total net sales and revenues increased 5.4% to $45.9 billion.
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However, global automotive operations profits fell from $368 million in Q3 2002, to just $34 million for Q3 this year.
North American profits plunged to $128 million from $533 million, losses at General Motors Europe improved from $180 million to $152 million, Brazil and Venezuela dragged the Latin America/ Middle East/Africa loss down to $104 million from $61 million while Asia-Pacific more than doubled profits to $162 million.
Adjusted income, which excludes results from Hughes, totalled $448 million, or $0.80 per share, in the third quarter of 2003. Adjusted net income in the third quarter of 2002, excluding special items and Hughes, totalled $696 million, or $1.24 per share. Third-quarter-2002 results included special items totalling an unfavourable $1.42 billion, or $2.62 per share but there were no special items in the third quarter of 2003.
“On balance, General Motors posted solid business results despite ongoing pricing pressure, lower production volumes and increased pension and health care costs,” said GM chairman and CEO Rick Wagoner. “And the accelerating U.S. economy and the enthusiastic response to our new products give us reason for optimism as we look forward.”
AUTOMOTIVE OPERATIONS
GM’s global automotive operations earned $34 million in the third quarter of 2003, compared with $368 million in the year-ago quarter. GM North America, GM Europe and GM Asia Pacific each reported market-share gains during the third quarter while global market share rose to 15.2% in the third quarter of 2003 from 15.1% in the third quarter of 2002.
Net income at GM North America (GMNA) reached $128 million compared with $533 million in the third quarter of 2002. Improvements in sales mix, material-cost performance, and productivity were offset by a production decline of nearly 5%, intense pricing pressure and increased pension and health care expense, compared with the year-ago period. The results were also affected by a $55 million favourable adjustment in GMNA’s recall reserves, reflecting reduced costs associated with previously announced vehicle-recall programmes, and a $27 million unfavourable adjustment for the adoption of a new accounting interpretation, FIN 46, which relates to the consolidation of variable interest entities.
GM Europe (GME) reported a loss of $152 million in the third quarter of 2003, an improvement from the $180 million loss in the year-ago period. Continued progress in GME’s cost-reduction efforts were partially offset by unfavourable currency-exchange rates.
GM Asia-Pacific reported a profit of $162 million in the third quarter of 2003 compared with earnings of $76 million a year ago, led by continued strong performance at Shanghai GM and improved equity earnings from GM’s Japanese automotive alliances. GM Asia-Pacific wholesale vehicle sales rose 10% in the third quarter, led by record sales in China.
GM Latin America/Africa/Mid-East reported a loss of $104 million in the third quarter of 2003 compared with a loss of $61 million a year ago. Results were negatively affected by unfavourable economic and market conditions in Brazil and lower sales in Venezuela.
GMAC
GMAC reported earnings of $630 million, up more than 30% from the $476 million earned in the third quarter of 2002. Financing operations remained strong as lower credit provisions more than offset narrower net-interest margins. Results from insurance operations more than doubled compared to the prior year, when earnings were adversely affected by the write-down of certain investment securities. Mortgage operations generated the biggest year-over-year improvement reflecting higher origination and securitisation volumes in both the residential and commercial mortgage sectors.
HUGHES
Hughes reported a loss of $23 million in the third quarter of 2003, compared with a loss of $81 million in the year ago period. Revenue rose to $2.6 billion in the third quarter of 2003, up from $2.2 billion in the same quarter last year, led by the growing subscriber base of pay-TV operation DirectTV.
Earlier this month, GM shareholders voted to approve transactions that would result in the split off of Hughes and the acquisition of 34% of Hughes common stock by News Corp. GM expects to complete the transactions in late 2003 or early 2004.
GM contributed $5.5 billion to its US pension plans in September and another $8.0 billion in early October, bringing its year-to-date contributions to $14.4 billion. In addition, GM contributed $3 billion to the VEBA trust for retiree-health-care benefits in the third quarter.
As a result of the contributions, GM now expects 2003 pretax pension expense will be approximately $2.6 billion, down from the previous estimate of $2.8 billion. For 2004, GM expects pretax pension expense to decline by at least $500 million to $2.1 billion or less. However, this reduction in pension expense will be largely offset by higher interest expense related to the recent global debt offerings.
LOOKING AHEAD
General Motors said the US vehicle market continues to be strong and it expects motor industry sales of approximately 16.9 million units in 2003. GM is forecasting North American production of about 1.35 million vehicles in the fourth quarter of 2003, which would bring total 2003-calendar-year production volume to approximately 5.4 million vehicles.
GM expects to earn approximately $1.00 per share, excluding Hughes and any special items, in the fourth quarter of 2003. As a result, GM said it would exceed its original 2003-calendar-year earnings target of $5.00 per share, excluding special items and Hughes.
