GM nets $1.75 billion, a second-quarter record

Numbers boosted by GMAC performance and sales of SUVs

Earnings

July 19, 2000|By Ted Shelsby | Ted Shelsby,SUN STAFF

With help from its finance arm and a boost in sales of its high-profit, full-size sport utility vehicles, General Motors Corp. yesterday reported record second-quarter net income of $1.75 billion.

The world largest automaker's profit was "a little higher than Wall Street expected," said David Healy, an analyst with Burnham Securities.

He said the company benefited from higher sales of its full-size SUVs and the improved performance of General Motors Acceptance Corp. (GMAC).

Net income was equal to $2.93 a share. During the comparable period last year, GM earned $1.73 billion, or $2.66 a share.

Revenue for the three months ended June 30 total $48.7 billion, up 8.15 percent from the $45.1 billion in the like part of last year.

GM beat the earning estimates of 17 analysts surveyed by Nelson Information by 12 cents a share.

"We maintained our momentum and achieved record-setting second quarter results due to the continued strong performance of our global automotive operations and GMAC," said John F. Smith Jr., GM's chairman.

GMAC posted a profit of $395 million, up from $391 million in the like part of last year.

GM's consolidated results also benefited from reduced losses at it Hughes Electronics Corp. Hughes cut its losses to $64 million in the most recent quarter, down from $92 million in the year-earlier period.

"The key North American and European markets remained very strong during the second quarter, and our automotive operations in those regions remained solidly profitable," said G. Richard Wagoner, GM's president and chief executive.

"In addition, our Latin American/Africa/Mideast region posted a significant turnaround with its third consecutive profitable quarter."

Net income from the company's big North America operations dropped to $1.41 billion, from a record $1.48 billion in the second quarter last year.

The company's Latin American/Africa/Mideast operations reported a profit of $10 million. For the like part of last year, they posted a loss of $38 million.

GM continues to be plagued by a decline in its share of the new-car market. Its share of the U.S. car market fell to 28.4 percent in the quarter just ended, down from 30.3 percent.

Its share of the truck market, which includes SUVs, vans and pickups, was 27.8 percent in the most recent quarter, down from 29.5 percent.

One part of its truck market that is doing very well, according to the company, is the full-size SUV. He said the company sold 130,000 of these vehicles during the quarter, up 13 percent from the 115,000 delivered in the corresponding period last year.

Whereas GM breaks even or even loses money on most fuel-efficient small cars, it makes "multi-thousands of dollars" on each big SUV sold, according to David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation.

Healy said the new models of GM's full-size SUVs are more profitable than the models they replaced, and their sales "are making a big contribution to GM's bottom line."

Another trouble area for GM is its Saturn car assembly plant in Wilmington, Del.

"We had a rough start on Saturn," said Ron Zarrella, head of GM's North American operations. During the quarter, the company eliminated the second shift at Wilmington and laid off 490 workers.

The company also dropped the second shift at its Baltimore van plant and laid off 600 workers.

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