GM operating profit beats projections Company offset effects of strikes in April by cranking up production

July 17, 1996|By Ted Shelsby | Ted Shelsby,SUN STAFF

General Motors Corp. surprised analysts yesterday by reporting better-than-expected second-quarter operating profits.

GM posted record operating profits of $2.65 a share, up 8.4 percent over the same quarter of 1995. The profits were based on improved earnings from its financing arm, a lower tax rate than expected, and an increase in vehicle production to offset the losses caused by a 17-day strike in April.

Most analysts were expecting the world's largest automaker to report operating results in the range of $2.48 to $2.51 a share.

Profits from continuing operations totaled $2.10 billion, or $2.65 a share. This compared with operating results of $1.93 billion, equal to $2.41 a share, in the year-earlier quarter.

Total revenue increased 6 percent to $44.8 billion from $42.2 billion.

"I was expecting them to come in at $2.50," said David Healy, an auto analyst with Burnham Securities. He attributed the difference to a $91 million increase in profits from General Motors Acceptance Corp., the automaker's financing arm, and a 34 percent tax rate, not the 37 percent rate the firm had anticipated paying.

GM's North American Operations and its Delphi Automotive Systems parts division, which account for about half of the automaker's total sales, posted a $170 million rise in net income during the quarter.

North American deliveries of cars and trucks rose to 1.51 million from 1.44 million, the company said.

Without the increased production, Healy said that GM's North American operations would have posted lower operating results for the second quarter.

A strike at two brake plants in Dayton, Ohio, during April idled all of GM's U.S. and Canadian assembly plants and trimmed vehicle production by about 240,000 vehicles.

The stronger showing by the North America division also helped to offset weak results overseas. GM's international operations suffered a 17.3 percent drop in profits to $424 million from $513 million in the same period last year.

The company attributed the decline to unfavorable currency exchange rates and labor and material costs in Latin America.

Consolidated net income, which includes a one-time charge of $343 million from June's spinoff of Electronic Data Systems Corp., fell 17.4 percent to $1.9 billion from $2.3 billion. On a per share basis, this was equal to $2.63 compared to $2.39 in the like part of last year.

Earnings of the Hughes Electronics Corp., GM's defense division, rose 6.3 percent to $306.6 million, or 77 cents a share, from $288.4 million, or 72 cents, a year ago.

"The second-quarter results from continuing operations demonstrate that we continue to gain ground toward achieving our long-range financial goals," said John F. Smith Jr., GM's chairman and chief executive officer.

GM's net profit margin, excluding Electronic Data Systems, was 5.2 percent in the second quarter, compared with 5.1 percent for the same period last year.

GM shipped 56,000 more vehicles in the U.S. during the quarter than in the same period last year. Its share of the U.S. car market rose to 34.7 percent from 33.7 percent, but its portion of the truck market fell to 28.5 percent from 29.7 percent.

U.S. fleet sales, which represent less profitable vehicle deliveries, totaled 22.5 percent in the quarter just ended, up from 19.6 percent a year ago.

The better-than-expected results helped GM overcome the JTC investors' doubts about the general stock market. GM's shares closed at $47.375, up 37.5 cents.

Pub Date: 7/17/96

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