GM loses $753m in quarter Low output, strikes, high costs blamed

October 30, 1992|By New York Times News Service

DETROIT -- General Motors Corp., laboring with excess car-manufacturing capacity and unable to trim costs fast enough, posted a third-quarter loss of $752.9 million yesterday, reflecting lower production in the United States and strikes by the United Automobile Workers union at GM plants at Lordstown, Ohio, and Lansing, Mich.

GM's poor financial results come as the board of the No. 1 automaker has ousted its chairman and chief executive, Robert C. Stempel, contending that he did not move quickly enough to turn the company around. Still, the results represented an improvement over a $1.1 billion loss in the third quarter of last year.

Revenue in the latest quarter was $29.44 billion, a 1.7 percent increase from $28.94 billion a year earlier. A spokesman said the strikes cost GM about 50,000 vehicles' worth of lost production. The Lordstown strike resulted in a shutdown of the company's minivan plant on Broening Highway, which employs about 3,000 workers.

GM was the last of the Big Three to report financial results for the quarter. Ford Motor Co. said Wednesday that it suffered a loss of $158.9 million, compared with a loss of $574.4 million a year earlier. Chrysler Corp. previously posted a profit of $202 million, compared with a net loss of $82 million a year earlier.

GM's loss was in line with analysts' estimates and a GM disclosure in a Securities and Exchange Commission filing last month. GM common shares were unchanged yesterday on the New York Stock Exchange, at $31.375.

John Casesa, an industry analyst for Wertheim Schroder & Co. in New York, estimated that GM's worldwide automotive operations lost $1.3 billion, offset by about $600 million in profit from its three non-automotive subsidiaries, which reported earnings yesterday. GM said its overseas automotive operations remained profitable.

Mr. Casesa rates the chance of a reduction or elimination of the dividend on GM common stock at 50 percent at the Monday board meeting in New York. The automaker, which last cut its dividend in 1991, now pays 40 cents a quarter, or $1.60 a year; the dividend payments amount to about $1 billion annually.

"If GM is going to clean house, cutting the dividend would be consistent with a fresh start," he said. "Many institutional holders I speak to not only expect it, but think it's the right thing to do."

GM has been trying to cut costs so it can make money on lower production volume. But because the cost-cutting has not occurred fast enough to satisfy the directors, the GM board will ++ be meeting to select a replacement for Mr. Stempel.

It appears likely that John G. Smale, a GM director, will become chairman, while John F. Smith Jr., GM's president, will be given the additional role of chief executive.

For the moment, however, Mr. Stempel said in a statement accompanying the financial results: "Aggressive cost-cutting activities are being intensified, and plans to streamline GM into a lean, flexible and highly competitive organization are being implemented at an accelerated rate." Mr. Stempel agreed to remain on the job until the board replaced him.

For the first nine months of the year, GM lost $970.7 million on revenue of $96.67 billion, compared with a loss of $1.99 billion a year earlier, on revenue of $89.45 billion.

GM said it benefited from a $629.8 million income-tax credit in the quarter, compared with a year-earlier credit of $327.3 million. GM's non-automotive pretax income rose to $536.5 million, from $259.1 million a year earlier, partly because of a gain from the sale of its interest in a robotics joint venture.

Worldwide factory shipments of GM cars and trucks to dealers reached 1.5 million in the third quarter, down 5.2 percent, or 83,000 vehicles, from the quarter in 1991. GM records revenue and profit when a vehicle is shipped from the factory.

GM dealers in the United States sold 1.1 million vehicles in the quarter, down 3.2 percent from a year earlier. The automaker's penetration of the American new-vehicle market dropped to 33.3 percent, compared with 34.5 percent in the 1991 quarter.

According to Mr. Casesa's calculations, GM's gross profit margin dropped slightly from a year earlier, mainly because of three factors: lower production volume, the strengthening of the German mark and more money set aside to pay warranty claims.

Acknowledging that the rest of the year could be difficult for GM if the economy does not show further signs of strength, Mr. Stempel said, "GM is even more determined to continue reducing structural costs, improving efficiency and quality, and strengthening its product line."

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