General Motors‘ results in the fourth quarter of 2001 are expected to be better than the previous guidance of approximately $US0.50 per share and the company will report a profit for its automotive
operations, vice chairman and chief financial officer John Devine told analysts in Detroit today.

“Improved profits generated by strong North American vehicle sales will be partially offset by the unfavourable effect of the currency devaluation in Argentina,” Devine said.

“Based on these factors, GM’s fourth-quarter earnings are now expected to be approximately $0.60 per share.”

Devine added that even with an expected reduction in overall industry vehicle sales due to weaker economic conditions, “GM expects to improve market share in each of its automotive regions” — North America (GMNA), Europe (GME), Latin America/Africa/Mid-East (GMLAAM), and Asia-Pacific (GMAP).

“Equally important, despite relentless competition and economic
challenges, we fully expect our global automotive operations to be profitable this year, and to generate positive operating cash flow,” Devine said.

Bob Lutz, GM’s vice chairman in charge of product development and chairman of GM North America, told the analysts, “General Motors will continue to focus on providing consumers with innovative, exciting, high-quality vehicles and services while relentlessly driving lower costs.”

GM’s 2002 earnings target is $3.00 per share, excluding Hughes. GM North America is expected to earn approximately $US750 million in calendar-year 2002 and the GMLAAM and GMAP regions are also expected to be profitable this year.

As GM Europe implements its major restructuring plan, results are expected to improve from 2001 levels, with losses under $350 million in 2002. GME expects to take an unspecified charge in the first quarter of 2002 related to the restructuring.

“GME is working aggressively to restructure its operations and strengthen its brands in order to achieve sustained profitability by 2003,” said GME President Mike Burns.

Analysts were told that General Motors Acceptance Corp. (GMAC) expects another relatively strong year in 2002, with net income of approximately $1.65 billion, down slightly from 2001, due to several external factors.

GMAC’s results are expected to be unfavourably affected by increased borrowing costs, off-lease residual values that will result in lower book gains, and slightly higher credit losses, partially offset by likely improvements in mortgage operations.

GM is forecasting total U.S. industry vehicle sales in 2002 “in the range of” 15.0 million to 15.5 million units, down about 10 percent from 2001 levels, which were the second highest in history.

Industry sales in Europe are expected to be down nearly five percent to approximately 18.5 million units. Sales in the Latin America/Africa/Mid-East and Asia-Pacific regions are expected to be relatively flat compared with 2001.

Pricing pressures are expected to continue in 2002, with net price
retention estimated at negative 1 percent in North America and in Europe.

“The inability to raise prices requires us to take even tougher measures to reduce costs,” Devine said. “We’re attacking costs at all levels. GM expects an accelerated rate of material-cost
reductions this year, and will intensify efforts to reduce structural costs.”

GM will continue to focus on improving manufacturing and engineering productivity, and plans to reduce salaried and contract employment levels by an additional 10 percent in North America and Europe to help make the company leaner and more efficient. It aims to hold fixed costs in its core automotive operations at or below 2001 levels despite a projected pretax increase of approximately $1.5
billion (about $1 billion after taxes) in pension expense and healthcare costs in 2002.

GM plans to reduce overall automotive capital spending by about 11 percent to $7.1 billion in 2002, while increasing the efficiency of vehicle development and improving management of working capital. GM North America, for example, plans to reduce overall capital spending in 2002 without decreasing the amount for product programmes.

“Overall, 2002 will be a very challenging year for the industry,” Devine said.