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GM 3Q earnings top target
No. 1 automaker posts sharp drop in profit but easily tops Wall Street expectations for period.
October 15, 2003: 1:13 PM EDT

NEW YORK (CNN/Money) - General Motors Corp. reported a sharp drop in third-quarter earnings Wednesday but still drove far past Wall Street expectations for the period.

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The world's No. 1 automaker earned $425 million, or 79 cents a share, including a loss from the Hughes Electronics unit it is in the process of selling. That's better than the 66 cents a share forecast by analysts surveyed by earnings tracker First Call, but off the $615 million, or $1.20 a share, it earned excluding special items but including Hughes a year earlier. Special charges in the year-earlier period resulted in a reported net loss of $804 million, or $1.42 a share, however.

Revenue rose to $45.9 billion from $43.6 billion a year earlier. Revenue from automotive operations rose to $35.8 billion from $34.6 billion. The increase came despite a slight decline in the number of vehicles sold worldwide in the quarter to 1.89 million from 1.95 million a year earlier.

GM said its global market share increased to 15.2 percent from 15.1 percent, with gains in all regions except its combined Latin America, Africa and Middle East territory.

Automotive operations turned an operating profit of $34 million, well off the $368 million that core operation earned a year earlier. The decline came from a drop in North American automotive earnings to $128 million from $533 million, but GM cut its losses on European auto operations and posted higher profits in its Asian-Pacific region.

"It is just above breakeven, but we think it's an important signal inside the company and outside the company that we were able to maintain automotive profitability," said GM Chief Financial Officer John Devine.

Earnings from the company's finance arm, GMAC, rose more than 30 percent to $630 million from $476 million a year earlier, helped by the strong mortgage refinancing business.

GM also said it expects to earn $1 a share in the fourth quarter, excluding the effects of Hughes. First Call's EPS forecast is $1.02, but that includes Hughes. The results should allow GM to top its original calendar 2003 earnings target of $5.00 per share, excluding special items and Hughes (GMH: down $0.04 to $15.42, Research, Estimates).

But Devine said that the company would probably not make its earlier target of income of $1.7 billion to $1.9 billion from North American auto operations, or limiting the European auto loss to less than $200 million, due to weaker-than-expected demand for autos in both markets.

North American net income for the first three quarters stands at only $759 million, down from $2.5 billion a year earlier. European losses have already reached $220 million in the first three quarters, although that's an improvement from the $420 million in the same periods a year earlier.

Devine said GM saw the amount paid in incentives retreated a bit in the third quarter from year-earlier levels, although he did not give detail. He said he was encouraged by that result, but that he doesn't expect GM to back off of its leadership position on incentives, even if the cash-back and below-market financing offers are eating into profits.

"We're going to continue to be aggressive in the marketplace," he said. "We'd like to improve our margins in North America. But we're going to watch the marketplace, we're not going to back off."

The company said its results for the year also could be helped by lower-than-expected pension plan expense this year, due to a combination of billions in contributions it has made in recent months and a stronger-than-expected return on plan assets.

"If asset returns remain at or above these levels for the remainder of 2003, the funded status of GM's U.S. hourly and salaried pension plans would improve dramatically by the end of the year and, with additional contributions, could approach a fully funded position in the near term," the company said in its earnings statement.

Shares of GM (GM: down $0.19 to $43.78, Research, Estimates), a component of the Dow Jones industrial average, were down slightly in morning trading Tuesday.  Top of page




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.