Strong vehicle sales, improved product mix in North America and a continued focus on cost reduction were key drivers of improved earnings and robust cash generation for General Motors in the first quarter of 2002.
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GM today reported that it earned $US791 million, or $1.39 diluted earnings per share of common stock, on revenue of $44.3 billion in the first quarter, excluding special items and Hughes.
That compares with $321 million, or $0.57 per share, on revenue of $40.7 billion in the first quarter of 2001, also excluding special items and Hughes.
Including special items and Hughes, GM’s first-quarter 2002 reported net income totaled $228 million, or $0.57 per share on revenue of $46.3 billion.
First-quarter-2002 results included a restructuring charge of $407 million after-tax, or $0.72 per share, related to improving the competitiveness of GM’s automotive operations in Europe.
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By GlobalDataIn addition, there were three special items at Hughes that had a total net unfavourable effect of $10 million after taxes.
GM’s results in the first quarter compare with $237 million, or $0.53 per share, on revenue of $42.6 billion in the first quarter of 2001.
The first-quarter- 2001 results included the $12 million, or $0.03 per share, favourable effect of the initial adoption of an accounting change (SFAS No. 133) relating to the treatment of derivatives.
Hughes had a net loss of $156 million in the first quarter of 2002, or $0.10 per share of GM $1-2/3 par value common stock, including the above-mentioned special items.
“Strong vehicle sales in North America coupled with cost reductions drove our profit improvements,” said GM president and chief executive officer Rick Wagoner.
GM’s global automotive operations earned $467 million in the first quarter of 2002, compared with $20 million in the prior-year period.
Global production increased approximately 3.7 percent in the first quarter, compared with the same period in 2001.
Strong performance in North America was partially offset by GM’s European operations, which have not yet realised full benefit from the current restructuring.
“The competitive landscape continues to be very challenging in all regions, but our improving results show that we are on the right course,” Wagoner said.
GM North America (GMNA) posted a substantial increase in income, earning $625 million in the first quarter of 2002, compared with $120 million in the first quarter of 2001.
Production volume increased 11.4 percent, with trucks growing to about 56 percent of total production, compared with about 52 percent in the first quarter of 2001.
GM’s overall U.S. market share was relatively stable at 28.3 percent in the quarter, however higher-profit retail sales increased significantly.
GM estimates that its retail vehicle share increased about 1 percentage point, driven by a 4 percentage-point jump in truck retail share.
GM Europe (GME) had a loss of $125 million in the first quarter of 2002, excluding the restructuring charge, compared with a loss of $86 million in the prior-year period.
The increased loss at GME was primarily attributable to a 15 percent reduction in production volume, and was only partially offset by reductions in material and structural costs.
The restructuring charge of $407 million after taxes for the Project Olympia turnaround plan included employee separations, asset write-downs, and streamlining the dealer network.
“The restructuring of our European operations, combined with our aggressive new product programs, will strengthen our brands and improve the efficiency of our operations and distribution system,” Wagoner said. “We know we must make significant progress in Europe, and we’re working hard to make it happen.”
GM Asia-Pacific earned $7 million in the first quarter of 2002, compared with a loss of $20 million in the first quarter last year. Increased equity earnings from alliance partners and favourable mix were primary factors.
GM Latin America/Africa/Mid- East (GMLAAM) recorded a loss of $40 million in the first quarter of 2002, compared with earnings of $6 million in the first quarter of 2001.
Steady production volume and increased market share were more than offset by the continuing effect of the Argentina currency devaluation, economic pressures, and unfavourable product mix in Brazil.
General Motors Acceptance Corporation (GMAC) earned $439 million in the first quarter of 2002, up 2 percent from the prior-year period when earnings totalled $431 million. These results reflect a significant increase in earnings from mortgage operations, with continued strong origination volumes in both the residential and commercial sectors.
Income from automotive financing operations declined due to higher credit losses and unfavourable borrowing spreads, which were only partially offset by strong retail asset growth in North America.
Income from insurance operations was down slightly in the quarter as lower capital gains more than offset improved underwriting results.
As a result of stronger-than-expected U.S. industry sales in the first quarter and improving economic indicators, General Motors is now forecasting total U.S. industry vehicle sales to be approximately 16.5 million units in 2002.
GM’s U.S. dealer inventories remain lean at approximately 1 million units, and second-quarter North American production is expected to increase approximately 10 percent over the second quarter of 2001, to approximately 1.5 million units.
Production for the calendar-year is expected to increase about 6 percent to more than 5.4 million units.
For the second quarter of 2002, GM estimates its earnings excluding Hughes, at $2.00 per share. Calendar-year- 2002 earnings are now expected to be approximately $5.00 per share, compared with prior guidance of $3.50 per share.
Including Hughes, the targets are approximately $1.90 per share for the second quarter, and $4.60 per share for the calendar year.
