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GM forecasts hit the skids
October 13, 2000: 12:36 p.m. ET

Analysts lower 4Q, 2001 estimates and some also cut ratings on stock
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NEW YORK (CNNfn) - Analysts lowered estimates for General Motors Corp. for the fourth quarter and 2001 Friday, responding to word that incentives are on the rise and production is on the decline in the core North America market.

Earnings tracker First Call said the consensus fourth-quarter estimate is now $1.85 a share, down from the $2.42 forecast earlier Thursday. It said 14 of the 16 analysts it surveyed for the fourth-quarter results had dropped their estimates either Friday or Thursday after the company's third-quarter earnings release. The other two had yet to respond.

Estimates for 2001 weren't lowered by as big a percentage, but they were down to $9.10 from the previous $10.12 target.

graphic"An increasingly competitive U.S. market, production rollbacks, and uncertainty in Europe, Asia, and Hughes (Electronics unit) warrant caution, in our view," PaineWebber analyst Joseph Phillippi said. But he reiterated his "attractive" rating on the stock, despite the revised profit picture.

"While we are not bullish on the outlook for GM's auto business, we believe the worse it gets, the sooner Hughes will be divested," he said.

Some analysts did downgrade their rating as well as earnings forecast. Lehman Brothers dropped the stock to neutral from outperform, while Dain Rauscher Wessels went to "strong buy - speculative" from "strong buy - aggressive," rating. But others, such as Wendy Needham of Credit Suisse First Boston, kept their rating despite lower earnings forecasts twice so far this week.

"With the prospect of a monetization of part or all of the Hughes asset over the next several months, GM shares are just too cheap to sell, in our opinion," she said.

The world's largest automaker posted record third-quarter earnings per share Wednesday, edging past recently lowered forecasts, but statements about losses in Europe and North American pricing and production raised concerns for the future. It did say it is considering spinning off or selling Hughes, whose primary business is satellite television system DirecTV.

"Due to rapid consolidation in the media and telecommunications industries, GM is now considering alternative strategic transactions involving Hughes and other participants in those industries," GM Vice Chairman Harry Pearce said in the earnings statement. "Any such transaction might involve the separation of Hughes from General Motors."

The company also told analysts that it is cutting North American production in the fourth quarter by about 63,000 vehicles.

"Compounding the production decrease is a 2 percent reduction in realized price, Phillippi said. "Incentives are part of the issue. The balance is related to mix." For example, Phillippi said GM was making too many fully loaded full-size pick-ups and would have to shift to less-profitable, less-expensive models for future production.

Shares of GM (GM: Research, Estimates), a component of the Dow Jones industrial average, were unchanged Friday at $57.38, after losing $1.25 in trading Thursday following the earnings report. Back to top


GM posts record 3Q EPS and looks at separating from Hughes - Oct. 12, 2000 - Oct. 12, 2000

GM posts record 2Q profit, beats forecasts - July 18, 2000


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