GM sales in U.S. drive up earnings Profit is $1.02 billion, higher than analysts foresaw for quarter

Motor vehicles

October 15, 1997|By Ted Shelsby | Ted Shelsby,SUN STAFF

General Motors Corp. reported better than expected third-quarter earnings yesterday, due primarily to a big improvement in its North American car and truck business.

Excluding a one-time tax adjustment, the nation's largest automaker posted a profit from continuing operations of $1.02 billion, equal to $1.26 a share, for the three months that ended Sept. 30. That compared with an operating profit of $956 million, or $1.16 a share, in the corresponding period of last year.

Sales rose 7.2 percent to $37.1 billion, from $34.6 billion.

Net income totaled $1.1 billion, or $1.35 a share, including a $65 million tax benefit. That compared with $1.3 billion, or $1.57 a share, in the same quarter a year ago, including a gain of $253 million in savings stemming from its decision not to close its auto assembly plant in Wilmington, Del.

"Overall, their earnings were slightly better than expected," said David Healy, an auto analyst with Burnham Securities.

"My model had them coming in at $1.15 a share, and the average prediction of Wall Street analysts was $1.21. So they did slightly better than we expected.

"I was surprised at how well they did in North America and how poorly they did overseas," Healy said.

GM's North American Operations, or NAO, reported its best-ever third quarter, with net income of $423 million. That compared with $24 million in the same period last year, excluding the savings from the decision not to close the Wilmington plant.

"The continuing improvement at GM-NAO is a great example of what can be accomplished when you stay focused on reducing costs, and deliver exciting new products to customers," John F. Smith Jr., GM's chairman, chief executive and president, said in a prepared statement.

GM shipped 1.25 million vehicles during the quarter that just ended, compared with 1.18 million in the same period last year. "We're making considerably more money on a slight increase in vehicle sales volume," said Toni Simonetti, a company spokeswoman.

During the quarter, GM captured 31.7 percent of the overall U.S. vehicle market, up from 30.4 percent last year, with gains in cars and trucks.

Production plants operated at 89.9 percent of peak capacity, up from 88.5 percent this time last year.

GM's international operation reported net income of $137 million in the third quarter, compared with $323 million in the same period a year ago, as it posted a $21 million loss in its European operations.

Smith said the lackluster results in its international business "reflect the intensely competitive market pressures in Europe" and the company's expansion programs in key markets, including Latin America and the Asia-Pacific regions.

Delphi Automotive System also had a rough quarter. The parts production arm reported net income of $55 million, down from $238 million in the corresponding period of 1996.

In a teleconference with analysts after release of its financial results, J. Michael Losh, GM's chief financial officer, attributed the poor performance of Delphi to the steep price cuts the division had to make to land new business.

Despite the upbeat earnings report, GM's stock, which had risen nearly 7 percent this month, lost $1.625 yesterday, closing at $70.375.

Pub Date: 10/15/97

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