GM earnings fall 52% in quarter 17-day strike is major factor

rebound predicted

April 23, 1996|By Ted Shelsby | Ted Shelsby,SUN STAFF

General Motors Corp. reported a 52 percent drop in first-quarter earnings yesterday, which it said was due primarily to the 17-day strike last month that idled all of its U.S. and Canadian vehicle assembly plants, including its Astro and Safari van factory in Baltimore.

It would have been a down quarter even without the strike at the two parts plants in Dayton, Ohio, that supply the bulk of the brakes for GM vehicles.

GM said the strike cut profits of its giant North American operations by $870 million.

For the three months which ended March 31, the world's largest automaker reported earnings of $1.02 billion, or 94 cents a share on a fully diluted basis, compared with $2.10 billion, or $2.44 a share, in the year-earlier quarter.

Sales declined 3.7 percent to $41.7 billion, down from $43.3 billion in the same period last year.

"Clearly our financial performance in the first quarter of 1996 was impacted by the strike and was certainly not indicative of GM's continuing profit improvement," said John F. Smith Jr., GM's chairman and chief executive.

GM's North American operations, including Delphi Automotive Systems, its in-house parts supplier, reported a net loss of $195 million in the quarter. This compares with a profit of $1 billion in the first quarter of 1995.

"There are no major surprises in the GM numbers," said David Healy, an auto analyst with Burnham Securities.

"Analysts were expecting them to come in at about 85 cents a share. They reported 94 cents, but when you take away the 7 cents for Hughes [Electronics Corp.] having sold part interest in its direct television operations, it was 87 cents."

Mr. Healy said the strike cut GM's earnings by $1.20 a share.

GM was well into a lackluster quarter prior to the Dayton strike, according to Toni Simonetti, a spokeswoman for the automaker. She said GM had already trimmed vehicle production by 117,000 units because of slow sales.

Its payment of incentives to boost sales rose during the quarter, making the cars that it did sell less profitable.

The strike eliminated the production of another 240,000 cars and trucks.

"Barring unforeseen events, our aim is to bounce back in the second quarter and subsequent periods this year to financial-performance levels reflecting our on-going progress in achieving corporate-earnings targets," Mr. Smith said.

Mr. Healy said GM's international operations did better than expected, although pretax income was down $266 million from the $843 million reported in the first quarter of 1995.

GM's stock closed at $56 yesterday, down 50 cents.

Pub Date: 4/23/96

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