GM Earns $440 Million or $0.78 Per Share in Third Quarter 2004

[PontiacJ8]

DETROIT - General Motors Corp. (NYSE: GM) today reported net income of $440 million, or $0.78 per diluted share, in the third quarter of 2004. These results are at the low end of the range of GM's earnings guidance provided in July. In the year-ago quarter, GM reported net income of $425 million, or $0.79 per share, and earnings from continuing operations of $448 million, or $0.80 per share. Revenue rose 3 percent to $44.9 billion.

Profits at General Motors Acceptance Corp. (GMAC) continued to be very strong, compared with the prior year, but automotive results were weaker due to increased losses in Europe, lower production volumes in North America, and slower economic growth in China.

"Competition in the automotive business around the globe remains intense, and we are seeing negative pricing in most major markets," said GM Chairman and Chief Executive Officer Rick Wagoner. "Even though we increased market share in all four regions, our automotive earnings in the third quarter reflect these challenging market conditions, and were frankly disappointing."

"These financial results highlight that we've got to move faster in addressing some tough cost challenges like health care in the United States and our overcapacity and high cost footprint in Europe, where we announced major restructuring actions earlier today. Our business strategy remains sound and on track: introduce great cars and trucks, stay aggressive in the market, strive for industry-leading cost competitiveness and quality, and generate cash. But we've got to move more quickly in addressing these challenging, chronic structural-cost issues."

GM Automotive Operations

GM's global-automotive business reported a loss of $130 million in the third quarter of 2004, compared with net income of $34 million in the prior-year period. Positive results at GM's Latin America/Africa/Mid-East (GMLAAM) were more than offset by losses at GM North America (GMNA) and GM Europe (GME), and lower profits at GM Asia Pacific (GMAP).

GM gained market share in all four regions of the world in the third quarter of 2004, with global market share rising to 15.5 percent from 15.1 percent in the year-ago period.

GMNA reported a loss of $22 million in the third quarter of 2004, compared with earnings of $128 million in the third quarter of 2003. GMNA's performance was primarily driven by lower production volumes and unfavorable product mix and pricing, partially offset by lower material costs and a reduction of approximately $250 million after-tax in the reserve set aside for product-liability matters. This reduction was the result of the annual analysis of product-liability reserves.

In addition, health-care costs in the United States continue to increase at an excessive rate and are a growing burden on GM's financial results.

"These continuing large increases in health-care costs put GM, and many other U.S. businesses, at a significant disadvantage," Wagoner said . "Clearly, the current situation is not sustainable. All of us -- government, business, the health-care industry, labor and health-care consumers -- need to work together to find solutions that ensure U.S. competitiveness in today's global economy."

GM's market share in North America rose to 28.5 percent in the third quarter of 2004, from 28.2 percent in the year-earlier period. In the United States, GM finished the third quarter with strong sales, posting a 20-percent increase for the month of September. That led to a reduction in dealer inventories of 230,000 units during the quarter to 1.137 million cars and trucks.

"GM continues its product renaissance," Wagoner said. "In fact, over the next four years we will replace more than 90 percent of our portfolio in North America on a volume basis. Through the remainder of this year, we have important product introductions with the all-new Pontiac G6, the Buick LaCrosse, the Cadillac STS, the Chevrolet Cobalt, and the Opel/Vauxhall Astra GTC in Europe. These products, and the many that follow them, will strengthen our brands and improve our competitiveness."

GME reported a loss of $236 million in the third quarter of 2004, compared with a loss of $152 million in the year-ago quarter. The most-recent quarterly results reflect intense price competition and foreign-exchange losses. GM's market share in Europe rose to 9.6 percent in the third quarter of 2004 from 9.1 percent in the year-ago period.

"The pricing environment in Europe has deteriorated significantly this year, and growth in some of our largest markets remains weak," Wagoner said. "In light of these factors, we need to move more aggressively to significantly reduce our cost structure in Europe, especially manufacturing and engineering."

GMAP earned $101 million in the third quarter of 2004, compared with earnings of $162 million in the year-ago quarter, also reflecting lower pricing and unfavorable mix driven by the economic slowdown in China. GM's market share in the Asia Pacific region rose to 5.1 percent in the third quarter from 5.0 percent a year ago.

"The economic slowdown in China affected our financial performance there during the third quarter," Wagoner said. "However, we see this situation as temporary. We continue to expect to see significant growth in China and throughout the region in the medium and long term."

GMLAAM earned $27 million in the third quarter of 2004, a substantial improvement from the year-ago loss of $104 million, and the third consecutive quarter of profitability.

"Our strong product portfolio and excellent dealer network have led to market-share gains in South America, South Africa and the Mid-East, while improved economic conditions have led to industry sales growth of 21 percent during the quarter," Wagoner said, adding GM's market share in the GMLAAM region rose to 17.1 percent in the third quarter of 2004 from 15.6 percent a year ago.

GMAC

Reflecting strong performance from GMAC's diversified business, GMAC earned $656 million in the third quarter of 2004, up from $630 million in the year-ago quarter.

Net income from financing operations totaled $259 million in the third quarter of 2004, compared with $320 million in the prior-year period. Lower credit losses and improved lease residual results were more than offset by lower net margins on stable asset levels.

Mortgage operations earned $302 million, up from $253 million in the year-ago period. Higher interest rates had a negative effect on loan production and securitization volumes but a favorable effect on net servicing revenue.

GMAC Insurance reported net income of $95 million for the third quarter of 2004, up from $57 million a year ago. Operational strength across the business unit contributed to improved net underwriting results while investment income remained stable compared with the prior year.

"GMAC once again delivered very impressive financial results, in spite of the more challenging interest rate environment," Wagoner said. "GMAC has done an excellent job diversifying its earnings base across its portfolio of global businesses, and also diversifying its funding base through new sources of liquidity both here and abroad. GMAC enjoys strong liquidity, and expects to continue to have ample access to the capital markets and other financing sources to meet its needs."

Cash and Liquidity

Cash, marketable securities, and short-term assets of the Voluntary Employees' Beneficiary Association (VEBA) Trust totaled $24.5 billion at Sept. 30, 2004, excluding financing and insurance operations, down from $25.0 billion on June 30, 2004. Cash flow is typically lower in the third quarter due to lower production volumes and costs related to the introduction of new vehicles. In addition, GM experienced higher spending on health care than in prior years and additional losses in Europe. For the nine months ended Sept. 30, 2004, automotive cash flow stood at $2.0 billion. While GM expects positive automotive cash flow in the fourth quarter, it has become more challenging to achieve GM's previously stated target of $5 billion for the full year. Looking Ahead GM continues to expect total U.S. industry sales of approximately 17.2 million vehicles in calendar year 2004. As a result of increased losses in Europe and slower growth in Asia Pacific, GM is revising its 2004-calendar-year earnings guidance to between $6.00 and $6.50 per share, excluding one-time items. This is in line with GM's original target at the start of the year and down from the midyear guidance of approximately $7.00 per share.

Source: GM Media

[orkan013]

GM needs to invest more money in developing their product so that way they do not have to offer huge rebates, untill they realize that their bussines will go down.
just look at their products new g6 has a 3.5 L 200hp two vavle per cylinder engine and four speed transmision that is 90's technology, but gm competitors offer 3.0 l vvt engines with 240hp four vavles per cylinder and 5 speed for the same price and they dont have to offer rebates to sell their products. Look at another example new Buick lacros, Buicks best sedan has a 3.8L engine 200hp and four speed transmision, this engine was develpoed in 1980's and they are trying to sell at as 2005 model, soon huge rebates will have to be offered for these two models. Until GM starts to invest more money in vechle development they will be a money losing company. hahha And lets not talk about GM's hybird development haha it's a joke.

[mrfunji]

It used to be that if GM gained a tenth in market share it translated to like 100 million or 1 billion to their bottom line (i forget the figure).

Seems like now with all these rebates that doesn't apply. They need to change their business model and stop worrying about market share. Take the RIAA - their buisness model changed but they never adapted...now they are in the pits.

They are also shooting themselves in the foot with all these rebates. Since everyone is obviously taking advantage of the rebates (market share = up), they won't need new cars in 2006-2007 when the new models come out that are supposed to 'save gm'.

I'm curious how the other automakers faired.

[mbukukanyau]

Originally Posted by mrfunji

It used to be that if GM gained a tenth in market share it translated to like 100 million or 1 billion to their bottom line (i forget the figure).

Seems like now with all these rebates that doesn't apply. They need to change their business model and stop worrying about market share. Take the RIAA - their buisness model changed but they never adapted...now they are in the pits.

They are also shooting themselves in the foot with all these rebates. Since everyone is obviously taking advantage of the rebates (market share = up), they won't need new cars in 2006-2007 when the new models come out that are supposed to 'save gm'.

I'm curious how the other automakers faired.

Wagoner is lost. Their gain in market share is as a result of rebates, not Better competitive products. Opel and Saab are making progress, Chevy is turning around, but the Guy has to stop whining and concentrate money on products not sales....
The Silvarado, T/Blazer, bread and Butter products need serious upgrading and instead of a mid cycle refresh they pile rebates... while Am I not surprised?
The CTS still has no coupe or convertible, No Right hand drive for Australia, Japan and UK, India, and the entire British Common Wealth, all major Markets for Cadillacs competition, The CTS interior sucks, GM has known this from the get go, done nothing about it, and they are complaining?

[orkan013]

Originally Posted by mbukukanyau

Wagoner is lost. Their gain in market share is as a result of rebates, not Better competitive products. Opel and Saab are making progress, Chevy is turning around, but the Guy has to stop whining and concentrate money on products not sales....
The Silvarado, T/Blazer, bread and Butter products need serious upgrading and instead of a mid cycle refresh they pile rebates... while Am I not surprised?
The CTS still has no coupe or convertible, No Right hand drive for Australia, Japan and UK, India, and the entire British Common Wealth, all major Markets for Cadillacs competition, The CTS interior sucks, GM has known this from the get go, done nothing about it, and they are complaining?

i Agree Silverado, t/blazer, cts, saturon ion, grand prix, chevy impala, monte carlo, sunfire, aztek, bonevile all buicks, devile, avalance, suburban, taho all need some serios exterio and interior styling updates and new powertrain and what did GM do nothing exept, complaining and blaming everbody else and promise better future with old technology

[TiburonJT]

Market share has never had a direct relationship with profits. GM needs to figure out a way to sells w/o the huge rebates, clearly this is hurting them (improvements in interiors is a good step imo). Part of the problem is the product, part of it is the need to maintain production because of the union (I have heard? But how does Ford get around this? Different agreements, location of factories?). This is disappointing news. I am curious how Ford will do with the huge decrease in sales.

[Smaart Aas Saabr]

wit, GM has 564102564 shares?

[dav305z]

I agree that the rebates need to end asap, but i contend with the idea that GM should focus on "profitability". This is decieving, simply because with all their capital and labor investments, GM like any big company, can only make money by selling LARGE volumes. Thus, GM's options for increasing profits are A) reduce their capital and labor investments by closing down factories, dealerships, and firing workers or B) sell more cars.

[lio45]

The problem with GM is that this $0.78 per share is going to be sent almost completely in the pockets of shareholders, instead of being kept and used as development money.

Whereas GM has a ~5% profit margin and a ~4% dividend rate, Toyota and Honda, for example, have ~0.5% dividends. Of course this is making GM shareholders happy right now, but it's short-sighted.

[lio45]

BTW, I "quoted" the above numbers out of memory; it's been that way for years. I don't guarantee their accuracy at this minute. You're free to dig up the real numbers (it will take under a minute! I'm just very lazy right now, and don't need the real numbers to prove my point).

[ibechip]

Yay GM sold more cars at a lower price. They're killing themselves off right now. Everybody now expects a Chevy compact to come with thousands of dollars off. What are they going to say when the dealership attempts to sell the Cobalts at sticker price? It had better be an amazing car I tell you that.

They really need to do something about the health care. This should be the main question of the presidential debate right now because it is bleeding profits off of companies. How is a small business supposed to survive when it can't hire workers due to the high health care costs?

[jro4566]

General Motors Corp. (NYSE: GM) today reported net income of $440 million, or $0.78 per diluted share, in the third quarter of 2004.

Let the good times roll!

[HEVguy]

Originally Posted by orkan013

...new Buick lacros, Buicks best sedan has a 3.8L engine 200hp and four speed transmision, this engine was develpoed in 1980's and they are trying to sell at as 2005 model

(1) The LaCrosse also has a 3.6-liter VVT DOHC V6

(2)(a) You probably don't even know enough about engines to understand what has changed with the OHV engine since the '80's.
(b) your blanket statement about "being developed in the '80's" can apply to many engines out there today. So What! That doesn't mean numerous improvements haven't been made.

(3) Your a mis-informed, fast talker. I bet you sell some brand of imports, don't you!? (Never trust a salesman's claims about competitors).

(4) I'd guess you sell Toyota's from your hybrid statement, funny thing is that GM is right up there with Toyota on hybrid technology (Research GM's Allison hybrid bus). Plus, the only reason GM hasn't already gone forward with their core hybrid products are the lack of profit potential because hybrid components are still too expensive. Why the GM Allison bus hybrid you ask? Potential for profit with expensive buses!

[ByTheLake]

Originally Posted by HEVguy

... Your a mis-informed, fast talker.

Not only is Orkan013 misinformed, but based on the spelling errors, I'd guess that he taught himself to read and write.

We all make occasional spelling errors in these on-line posts, but I nearly had to hire an interpreter to get through Orkan's post.

[Ming]

GM misses by a mile

No. 1 automaker's earnings fall well short of forecasts, cuts targets; stock tumbles.

October 14, 2004: 12:20 PM EDT
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - General Motors Corp. posted flat third-quarter earnings Thursday that fell well short of Wall Street forecast and cut its earnings outlook for all of 2004 -- news that sent its stock tumbling.

http://money.cnn.com/2004/10/14/news...0/gm/index.htm