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GM warns on 4Q
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October 18, 2001: 1:37 p.m. ET
No. 1 automaker's 3Q profit plunges but tops target; bigger drop seen in 4Q.
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NEW YORK (CNNmoney) - General Motors Corp.'s third-quarter profit plunged on declining auto sales, and the company warned Thursday it will see a much sharper-than-expected drop in fourth-quarter earnings.
The world's largest automaker earned $385 million, or 85 cents a share, excluding special items. That's down from $829 million, or $1.55 a share, in the year-earlier period, although it topped the 80 cent a share earnings forecasts of analysts surveyed by First Call.
GM said it now expects fourth-quarter earnings of 50 cents a share, well below the First Call forecast of 71 cents and less than half the $1.15 a share it earned a year earlier.
The drop puts the company on course for full-year earnings of $3.11 a share, well below its earlier guidance of $4.25 a share. But analysts have never matched the company's confidence for its 2001 earnings, as the First Call forecast was for $3.28 a share.
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John Devine, CFO of GM, talks about his company's performance.
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Still, GM Chief Financial Officer John Devine said GM was pleased with the performance in the light of the difficult market for auto sales, and is confident that GM will be able to stay profitable, while competitors struggle. Ford Motor Co. (F: down $0.15 to $16.98, Research, Estimates) reported a third-quarter loss and warned of the risk of another loss in the fourth quarter.
"We think we can still make money in this environment," he told CNNfn's Market Call. "We think we'll keep our volume up; our market share is up. When we look at the third quarter, despite a very difficult quarter for all of us, we think we performed well."
GM announced Wednesday it was extending its zero-interest financing financing offer on many models to Nov. 18, past its original Oct. 31 deadline. Devine said that it is difficult to make money on any sale using the zero interest incentive, but said it was important to keep sales and market share strong. And he said October sales have been very strong in response to the program.
Overall revenue at slipped to $42.5 billion from $42.7 billion a year earlier, as worldwide GM (GM: down $0.35 to $42.42, Research, Estimates) vehicle sales fell to 1.91 million from 2.04 million a year earlier.
The company saw flat vehicle sales and a slight decline in revenue from its European operations, but still saw pre-tax losses from Europe rise to $400 million from $265 million a year earlier. The company's Hughes Electronics (GMH: up $0.56 to $14.91, Research, Estimates) unit, which it has announced plans to sell, saw its net loss rise as well, but results were helped by increased income from GM Acceptance Corp., its finance arm.
The company took a series of charges in the quarter, including one for plans to close a St. Therese, Ontario, plant which makes the Camaro and Firebird, as well as a variety of charges at Hughes. The charges total $753 million, or $1.26 per share, and left the company with a net loss in the quarter of $368 million, or 41 cents a share.
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Devine told Market Call that while GM is looking at all measures of cost cuts and may further cut capacity in the coming months, it does not anticipate any further plant closings while the company operates under the current labor contract which runs through 2003. That pact assures United Autoworkers members nearly full pay when on layoff. 
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GM extends zero-interest offer 3 weeks - Oct. 17, 2001
Ford hits 3Q loss target, warns on 4Q - Oct. 17, 2001
Big Three count on zero to help sales - Oct. 8, 2001
Ford warns on 3Q; Chrysler idles plants - Oct. 2, 2001
GM dropping Camaro and Firebird in '02 - Sept. 25, 2001
Attack hits already weakening auto sales - Sept. 21, 2001
GM offers no-interest financing - Sept. 20, 2001
GM reaffirms 3Q profit target - Sept. 17, 2001
Timeline for Hughes sale not set - Sept. 17, 2001
Automakers report mixed results in June - July 3, 2001
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