GM rebounds with $513 million profit Good news for Big 3 is now unanimous

April 30, 1993|By New York Times News Service

DETROIT -- With revenue up and many costs down, General Motors Corp. reported first-quarter net income yesterday of $513.2 million, in contrast to a loss a year ago.

That completed a good first quarter for the Big Three automakers.

On Wednesday, Ford Motor Co. reported its best quarter in several years; and last week, Chrysler Corp. reported strong operating earnings.

General Motors said its revenue for the current quarter rose 8.4 percent, to $34.96 billion, from $32.26 billion last year.

GM executives said they were encouraged that the results showed improvement, particularly in contrast to the losses generated in the past few years by the company's North American operations.

In North America, earnings before interest, taxes and a charge for future liability for employee benefits was $525 million, compared with a $992 million loss a year ago -- a positive swing of $1.52 billion.

"This is quite an accomplishment, especially in a ho-hum automotive market and with the weak car lineup [GM had last year]," said Wendy Needham, automotive analyst for Smith Barney in New York.

But if some analysts were pleased, investors were less so, and GM's stock price fell $1.375, to $41, with more than 4 million shares traded.

Just as the North American operations of GM are beginning to perk up, its overseas operations are headed downward, mostly because of weak economies in Europe. Net income from international operations was $165 million in the quarter, down from $482 million.

John F. Smith Jr., GM's president and chief executive since April 1992, has promised to make the company's operations break even in 1993, excluding interest, taxes and the effect of an accounting change to reflect the cost of future retiree benefits.

"Our first-quarter results are on track consistent with achievement of this very aggressive objective," Mr. Smith said. "We won't let up as we continue to work toward our 1993 target."

On Wednesday, Ford reported earnings of $572 million, or $1.02 share, its best quarter in nearly three years.

And last week Chrysler reported first-quarter operating profits of $530 million, although a $4.68 billion write-off for retiree health care resulted in a $4.15 billion loss.

Wednesday, GM shares had risen $2, as the company's Hughes and Electronic Data Systems subsidiaries reported combined profits of nearly $600 million.

On a per-share basis, earnings attributable to GM common shares in the quarter were 42 cents.

Last year, GM lost $166.7 million, or 53 cents a share, before a $20.9 billion charge to account for the cost of retiree benefits. That created a $21.1 billion loss in the first quarter of 1992.

GM's share of the U.S. vehicle market dropped to 33.1 percent in the first quarter, compared with 34.5 percent a year earlier, but the company said most of the drop could be attributed to fewer sales to fleet customers.

GM chief financial officer Richard Wagoner said the automaker was making headway in reducing costs.

But he warned that contract negotiations this summer with the United Automobile Workers union "could have an impact" on the company's earnings progress.

As the three-year labor contract draws to a close, GM has been quietly trying to persuade the union to consider ways to reduce ** health-care outlays for workers.

But at a UAW planning meeting this week, union leaders loudly warned against tampering with health-care benefits.

Mr. Wagoner said GM projected that Europe would remain profitable this year, even though it expects European economies to remain weak for the rest of 1993.

"We are well positioned against our European competitors," he said. "and we've been getting great reviews of our new Corsa," a small car.

For the quarter, GM sold 2.02 million vehicles worldwide, compared with 1.89 million last year.

But gross profit margins -- sales minus the cost of goods sold, excluding administrative overhead -- were better, too -- 14.2 percent compared with 12 percent last year.

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