GM earns record $6.9 billion in year Cost-cutting, profits overseas, lower taxes cited for success

January 31, 1996|By NEW YORK TIMES NEWS SERVICE

DETROIT -- The General Motors Corp.'s core business suffered several reversals late last year, but nimble work by the company's tax accountants sent its net income soaring to another record in the fourth quarter and for the year.

The nation's largest automaker reported yesterday that strong sales of lower-profit small cars, shortages of higher-profit trucks and foreign currency losses combined to reduce its pretax profit for its automotive operations by 42 percent in the last quarter.

GM's market share for the United States fell to 32.4 percent, from 32.8 percent in 1994 because of a weak performance in the truck market.

But the conclusion of several tax disputes, some of which dated to 1982, allowed GM to post a gain of nearly 19 percent in net income to about $1.87 billion in the fourth quarter, or $1.98 a share. Revenue rose 3.2 percent, to $43.93 billion.

The company's fourth-quarter earnings exceeded analysts' expectations, even excluding the nonrecurring tax gains and charges. GM's earnings were reported early yesterday, and from the moment trading began on the New York Stock Exchange, it was one of the most actively traded issues in a rising market.

GM shares closed at $53.625 a share, up $1.375.

Based on GM's continuing recovery, some analysts predicted that the company would raise its quarterly dividend perhaps as early as this quarter.

GM now pays 30 cents a quarter, having most recently raised the dividend last spring.

For all of 1995, GM's earnings were $6.88 billion, or $7.21 a share, up 40 percent from $4.90 billion, or $5.15 a share, in 1994. Revenue rose almost 9 percent to $168.83 billion. Operating profit in North America more than doubled to $3.35 billion.

Numerous one-time tax changes helped GM set new records in net income despite the weakness in operating profit. The company's income tax expense in North America fell to $81 million in the fourth quarter from $151 million a year earlier, and its international operations managed a $319 million tax credit after paying $218 million a year earlier.

Until yesterday's report, many analysts had been gloomy about GM's prospects in North America because it faced little growth in the new car market, heavy discounting by rivals and weak sales for the big, profitable models like those sold by its Cadillac and Oldsmobile divisions.

But GM said it had spent an average of only $633 a vehicle on incentives in North America in the fourth quarter, down from $738 a year earlier. As a result of the modest incentives and continued cost cuts, pretax profits in North America only edged down to $656 million, from $760 million a year earlier.

J. Michael Losh, the company's chief financial officer, said that the fourth-quarter performance on taxes would probably not be repeated. "Taxes should come back, like right away," he said.

He predicted that GM's North American operations would show improved financial results in 1996 because the company has "the right cost structure and a strong product lineup."

Mr. Losh emphasized that GM had sustained car and truck sales in the fourth quarter despite modest discounts. "We're a little out of sync with the rest of the industry. Isn't that wonderful?" he said.

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