General Motors Corp. today reported that it earned $US5.0 billion, or $US8.58 diluted earnings per share, in calendar year 2000 – excluding special items – on record revenues of $US183.3 billion. Revenues were up nearly four percent from 1999 and exceeded the previous record of $US176.6 billion in 1999.
For the fourth quarter of 2000, GM earned $US609 million, or $US1.15 diluted earnings per share, excluding special items. That was down about 51 percent from strong year-ago results because of the decline in Europe and losses at GM’s affiliate Isuzu.
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“GM had another good year despite the extremely competitive global market and fourth-quarter slowdown,” chairman John F. “Jack” Smith Jr. said.
“Earnings were the second-best in GM history and revenues set a record. As we enter a more challenging period, GM’s taking tough actions to reduce structural costs, realign capacity and pursue growth opportunities to generate consistently strong results.”
CALENDAR YEAR RESULTS
Calendar-year-2000 income of $US5.0 billion, or $US8.58 per share, on revenue of $US183.3 billion compares with record annual earnings of $US5.7 billion, or $US8.62 per share, and revenue of $US176.6 billion in 1999, all excluding special items.
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By GlobalDataIncluding special items, calendar-year-2000 net income totalled $US4.5 billion, or $US6.68 per share, on revenue of $US184.6 billion. The special items, totaling an unfavorable $US520 million, or $US1.90 per share, relate to the previously announced gain on the sale of the Hughes satellite-manufacturing business to Boeing, and costs related to actions to improve GM’s competitiveness in its core automotive business.
These initiatives include the phase out of Oldsmobile, planned capacity reductions in Europe, and volume reductions and production changes in North America.
Record industry sales in the United States led to income of $US4.4 billion for GM North America in 2000. GMAC had record net income for the second consecutive year, totaling $US1.6 billion in 2000, marking the sixth consecutive year of earnings growth. The improved performance resulted primarily from the expansion of its mortgage business and other growth initiatives.
FOURTH-QUARTER RESULTS
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Out: Vectra producion to end at the Luton, UK, Vauxhall plant |
Fourth-quarter income was $US609 million, or $US1.15 per share, compared with $US1.3 billion, or $US1.95 per share, in the fourth quarter of 1999, excluding special items. Including the special items, fourth-quarter net income was $US89 million, or a loss of $US1.16 per share (The EPS loss is due to the apportionment of earnings between GM’s two classes of common stock). This compares with net income of $US1.1 billion, or $US1.86 per share, in the fourth quarter of 1999.
GM announced in December a series of significant initiatives intended to strengthen its competitiveness and better focus its resources on key growth activities. These actions included the phase out of the Oldsmobile Division; planned discontinuation of passenger-car production at the Vauxhall/Opel Vectra plant in Luton, England; North American volume reductions and production changes; and 10-percent reductions in salaried and contract employment levels in North America and Europe.
“These were difficult decisions, but necessary to position General Motors to compete in increasingly competitive market conditions,” said Rick Wagoner, president and chief executive officer. “While we hope that the recent industry slowdowns in North America and Europe will prove to be a temporary correction, we believe that strong actions are required to help us more effectively compete in the marketplace and achieve improved performance in the future.”
In North America, GM’s fourth-quarter earnings of $US1.0 billion were about the same as in 1999, excluding special items, with lower volumes and strong pricing pressures partially offset by favorable product mix and continued cost reductions.
“Operating lean and fast is becoming an element of our culture, rather that just a reaction to the industry’s inevitable down cycles,” Wagoner added.
Results in Europe, a loss of $US463 million, were adversely affected by a slowdown in vehicle sales in the fourth quarter that was more severe than anticipated, continued pricing pressures, unfavourable product mix, country mix, and one-time factors.
“Our fourth-quarter performance in Europe was unacceptable,” Wagoner said.
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The Oldsmobile Division is being phased out |
“We are taking major steps to improve operating performance, including the introduction of innovative new products; improving capacity utilisation; intensifying overall cost reduction; and aggressively pursuing synergies with our alliance partners in purchasing, powertrain activities, product development, and other important areas.”
Results for GM’s Latin America/Africa/Mid-East (LAAM) and Asia-Pacific regions declined from the prior-year period. While volume was up, LAAM had a loss of $US16 million as performance was affected by unfavourable product mix, the start-up of the new Celta assembly plant in Brazil, and inflation-driven costs not fully recovered in price. Asia-Pacific’s loss of $US107 million reflected primarily the losses at GM affiliate Isuzu Motors Ltd.
GMAC’s fourth-quarter 2000 net income improved by more than 11 percent to $US409 million, up from $US367 million in the fourth quarter of 1999.
LOOKING AHEAD
General Motors expects U.S. vehicle sales will moderate from 2000’s record of 17.8 million units to a level ranging between 16 million to 16.5 million units. Although the industry entered the first quarter on a downward track, economic growth is expected to improve later in the year.
Previously announced production cuts are expected to impact first quarter results, with the current expectation that a marginal profit will be achieved.
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Cadillac Escalade EXT |
For the calendar year, while there are considerable uncertainties in the economic environment, GM is comfortable with the current financial analysts’ consensus earnings forecast of approximately $US4.25 per share.
“We remain intently focused on innovative new products,” Wagoner said.
“Product is the all-important driver of success, and I am pleased that we have a number of major vehicle introductions worldwide this year. And, we’re combining that with an enhanced focus on our cost structure to assure that we meet our consumer value expectations and our shareholders’ earnings expectations.”
Among key products coming to North America this year are the all new Chevrolet TrailBlazer, GMC Envoy and Oldsmobile Bravada midsize SUVs, the industry-first Chevrolet Avalanche and Cadillac Escalade EXT, Buick’s Rendezvous and Saturn’s first SUV, the VUE. Equally important are key technologies such as the all-new Vortec 4200 in-line six-cylinder engine, QuadraSteer four-wheel steering system, Versatrak all-wheel-drive system, and GM’s OnStar system, which is now installed in more than 1 million vehicles.
In Europe, the new Vauxhall/Opel Speedster, new Corsa and Zafira models, an Astra convertible, the Vivaro and Combo commercial vans, and improved availability of diesel engines are important factors.
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Vauxhall/Opel Astra convertible |
In Latin America, new local entries include the Chevrolet Zafira and Grand Vitara, along with the Brazilian-built Celta introduced late last year.
In China, Buick’s new compact family car, the Sail, is the third distinct model GM has introduced in that important growth market. The Zafira was recently introduced in Asia and is produced at GM’s Thailand plant for the Asian market, and for export to other regions. GM and Suzuki will begin production in September of a small Chevrolet 4×4 lifestyle vehicle at Suzuki’s Kosai plant in Japan. The vehicle will initially be sold in Japan and Australia.
PROFIT SHARING
As a result of the profits generated in 2000 by GM’s operations in the United States, profit-sharing payments of approximately $US800 will be made in 2001 to approximately 147,000 of GM’s represented employees in the United States who worked the entire year. This is the seventh consecutive year that profit-sharing payments have been made to U.S. employees.
