General Motors is on track to achieve its second-quarter and full-year financial targets, helped in part by stronger-than-expected global automotive sales so far this year, the firm’s chairman and chief executive Rick Wagoner reportedly said on Monday.
GM’s European division, however, continues to pose challenges, and the carmaker said it expected to lose money in Europe again this year after initially forecasting at least break-even results, the Associated Press (AP) reported.
According to AP, Wagoner and other GM executives, speaking at their midyear meeting with Wall Street analysts, said the company was poised to meet its goal of earning $US2 to $2.25 a share in the second quarter and $7 a share for all of 2004, excluding special items – GM is scheduled to report second-quarter earnings on July 21.
For now, the consensus estimate of Wall Street analysts is for GM to earn $2.21 a share in the second quarter and $7.16 for the year, according to Thomson First Call, the report said.
“Longer term, we continue to work toward our goal of achieving earnings of $10 per share by 2006,” GM vice chairman and chief financial officer John Devine reportedly said.
According to AP, Wagoner said he was encouraged by predictions that the global industry was on pace to top 61 million sales this year, which would be a new record – he said GM expects worldwide volume to increase by 10 million to 12 million units over the next five or six years, the majority of the growth coming in emerging markets such as China, Korea, India and Poland.
AP noted that GM said last week it plans to spend $3 billion in China over the next three years, an investment that will more than double its vehicle assembly capacity to 1.3 million units – GM plans to introduce 20 new vehicles in China during that time.
Wagoner reportedly said GM was on track to meet its goal of generating $5 billion in cash this year, but he wasn’t satisfied with profits in some regions – he said GM’s operations in Latin America, the Middle East and Africa were performing a little better than expected, North America and Asia Pacific were “on track” and Europe is “a bit rougher than we expected.”
Specifically, according to the Associated Press, GM North America is on pace to hit its earnings target of $1 billion to $1.4 billion this year, GM Asia Pacific is on track to earn between $700 million and $800 million while, in the Latin America/Africa/Mid-East region, GM reportedly said it expects to narrow losses further than its earlier goal of a loss of $100 million to $200 million.
GM, which is restructuring its European operations, reportedly said the overseas division is likely to lose money this year after posting a $286 million loss in 2003 and missing its financial targets – the European division has been hindered by increasing competition from Asian brands and a sluggish turnaround at Adam Opel AG, GM’s German arm.
“Overall, we still need to keep an intense focus on improving automotive profitability,” Wagoner said, according to AP.
GM reportedly said other full-year financial priorities were on track – it expects to reduce structural costs in automotive operations by more than $500 million, reduce material costs by 3.5% in North America and 3% in Europe and hold capital spending to $7 billion.
According to the Associated Press, finance arm General Motors Acceptance Corp. continues to be a strong contributor to the company’s financial performance and is beating expectations this year – the company said it was confident GMAC would surpass “by a wide margin” its target of $2 billion in net income for 2004.