In line with its rivals, GM posts profit Overseas sales sparkle as North American market stays weak

July 30, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- General Motors Corp. completed the picture of a rebounding U.S. auto industry yesterday, posting its second ,, straight profitable quarter and staying on track to post a profit for 1993.

The world's largest automaker, which has lost $30 billion in the past three years, reported a net profit of $889 million for the April-through-June period, compared with a $46 million loss, excluding special charges, for the year-ago quarter.

On Wednesday, Ford Motor Co. and Chrysler Corp. reported FTC second-quarter profits of $775 million and $685 million, respectively.

GM's improvement over last year was more dramatic if the restructuring charges are included in last year's figures. These charges boosted the 1992 loss from $46 mil

lion to $703 million for the second quarter of 1992.

The net income worked out to 92 cents a share, slightly higher than Wall Street's average estimate. Revenue was up 3.9 percent, to $36.7 billion, as vehicle deliveries increased 3.2 percent, to 2.3 million units worldwide.

GM operates an assembly plant that employs about 3,400 on Broening Highway in East Baltimore.

Despite the nearly $1 billion swing in its fortunes between the second quarter of this year and the same period last year, GM failed to turn a profit in its crucial North American operations, which account for 65 percent of sales.

GM did manage to stem its losses in its home territory, to $95 million this quarter, from $761 million for the period last year. But the company relied on overseas auto sales and profits from its computer, aerospace

and banking wings for its profits.

On Wednesday, GM's Electronic Data Systems, General Motors Acceptance Corp. and Hughes Electronics subsidiaries reported combined profits of $695.5 million.

"I think the numbers show we are on track but that we've still got a long way to go," said G. Richard Wagoner Jr., GM's executive vice president and chief financial officer. "Clearly, the situation in North America is not sustainable. We can't rely on the subsidiaries to cover losses in North America."

Speaking at a Detroit news conference and to reporters in New York via satellite hook-up, Mr. Wagoner said the results for GM's international operations were especially encouraging. European and Latin America operations earned $368 million in the second quarter, compared with $284 million a year ago. The improvement came despite the reces

sion in Europe, where GM saw declining auto sales but an increase in its market share.

, The opposite was the case in

See GM, 18D, Col. 4

GM, from 10D

North America, where volume was up but market share was off, declining to 34.8 percent of all vehicles sold in the United States, from 35.5 percent a year ago. GM said the decline resulted from a company decision to reduce less-profitable sales to rental fleets.

For the first six months of the year, revenue was up 6 percent, to $71.6 billion. Profits were $1.4 billion, or $1.34 a share, compared with a loss of $21.7 billion, or $35.14 a share, for the first six months of last year. The heavy losses for the first six months of 1992 included restructuring and accounting charges of about $21 billion.

Last year, GM lost $4.5 billion in its North America operations, an improvement over 1991's $8 billion loss for the strategic market but one that top management said was unac

ceptable. This year, officials say they still believe they can break even in North America, despite the continuing losses, which, including the second quarter, amount to $289 million this year.

Analysts, however, said that while GM may come close to breaking even in North America, it is unlikely to close the gap entirely.

The reason is that the third quarter, which runs from July 1 to Sept. 30, is traditionally a weak period as factories retool to make models.

In addition, GM, like Ford and Chrysler, had two things going for it in the most recent reporting period that it won't have for the rest of the year: the strength of the spring and summer months of the second quarter, when consumers traditionally buy cars, plus a one-shot burst of consumer spending last spring as consumers replaced older cars after years of austerity.

"I have trouble forecasting buoyant levels of car sales for the rest of the year," said John E. Hilton, an automobile industry analyst at Argus Research. "The economy really has been spotty at best, so I don't think the buying levels of the second quarter are sustainable."

Other reasons for uncertainty surrounding the Big Three's prospects include labor agreements with the United Auto Workers that expire in seven weeks, the manufacturers' continued reliance on rebates and leasing to spur sales and its underfinanced pension fund.

The good news Wednesday from Ford and Chrysler, and from GM yesterday, was not reflected by their stock prices. Chrysler's stock dropped $2 a share Wednesday, to $42.625, and Ford's rose a scant 75 cents, to $52.

GM's stock rose 50 cents yesterday, to close at $47.50.

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