Pickup sales help GM profit to accelerate

Third-quarter earnings rebound from 1998 period when strikes hobbled firm

Automotive industry

October 15, 1999|By BLOOMBERG NEWS

DETROIT -- General Motors Corp. reported a third-quarter profit of $877 million, or $1.33 a share yesterday, rebounding from a loss when strikes hobbled the world's largest automaker in the year-earlier period.

GM's results were aided by sales of high-profit trucks such as the Silverado and Sierra pickups in the United States. GM concluded United Auto Workers contract talks last month without any strikes -- a marked change from the 1998 quarter, when two Michigan walkouts left GM with a loss from continuing operations of $309 million, or 52 cents a share.

The automaker's sales of pickups have surged this year as the industry prepares to beat the U.S. record of 16.03 million vehicles sold in 1986. GM's U.S. performance, helped by cost-cutting, was offset by losses in Latin America and Asia and lower profit in Europe. Revenue rose 28 percent to $42.8 billion.

The earnings exceeded the $1.24-a-share average forecast in a First Call analysts' survey and were in line with "whisper estimates" of about $1.34 a share. GM fell 12.5 cents yesterday to close at $65.

GM's results exclude Delphi Automotive Systems Corp., the world's largest parts maker, which it spun off in May. Without the strikes, GM would have earned $656 million, or 96 cents a share, in last year's third quarter.

GM told analysts that it cut costs by $2.2 billion in the year's first nine months, making it likely to hit its 1999 target of $3.4 billion.

North American auto operations earned $671 million, compared with a loss of $595 million in last year's strike-weakened third quarter. GM's U.S. market share rose to 28.9 percent from 24.1 percent. Vehicle prices, including rebates and other incentives, rose 0.4 percent.

Sport utility vehicles, pickups and minivans made up 47.5 percent of GM's U.S. sales in the first nine months of 1999, up 0.6 percentage points from the year-earlier period. Sales of its Silverado and Sierra pickups surged 19 percent, to 623,169.

The increase had a big bottom-line impact, because GM earns $7,000 pretax on each additional pickup it can squeeze out of its factories -- twice the margin on a typical GM car, said John Casesa, a Merrill Lynch & Co. auto analyst.

The automaker bought back 5.7 million of its shares, valued at $386 million, in the third quarter and first 13 days of this month. GM needs to buy back about another $1.5 billion of its shares to fulfill a $4 billion program it began in March 1998, and hopes to complete the program by year's end.

A charge that GM took in the year-earlier period for the sale of Delphi's seat, light and coil-spring businesses was reflected in Wednesday's results from Delphi.

Delphi earned $136 million, or 24 cents a share, in the third quarter, compared with a year-earlier loss of $214 million, or 38 cents pro forma.

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