GM profit more than doubles in quarter

Its U.S. market share increases

pension plan is under-funded

July 17, 2002|By Ted Shelsby | Ted Shelsby,SUN STAFF

With a big boost from its North American operations, which account for about half of its total vehicle sales, General Motors Corp. reported yesterday that its net income more than doubled during the second quarter.

For the three months that ended June 30, the world's largest automaker had net income of $1.3 billion, equal to $2.43 a share, from revenue of $48.3 billion. In the corresponding period last year, GM had net income of $477 million, or $1.03 a share, on revenue of $46.2 billion.

Excluding the unprofitable operations of Hughes Electronics Corp., which GM is in the process of selling, and $55 million to cover the expenses of a change in European vehicle recycling laws, GM earned $1.5 billion, or $2.63 a share. That compares with earnings of $766 million, or $1.37 a share, in the corresponding quarter last year.

Analysts had predicted earnings per share of $2.42 for the quarter.

"Generally, they did pretty good," said David Healy, an auto analyst who follows GM for Burnham Securities. "If it were not for their increased incentives, they would have beat the market by an even wider measure."

Analysts estimate that the company's latest zero-percent financing plan boosted the average cost of its incentive program by about $350 per vehicle, to a total of about $2,500.

During a conference call with analysts and reporters, John M. Devine, GM's vice chairman and chief financial officer, disclosed that the company's pension fund, which covers more than 400,000 retired workers, would be underfunded by about $12.7 million by the end of the year.

The company reported that it contributed $1 billion in cash last month to its long term Voluntary Employees' Beneficiary Association Trust, in addition to a previously announced $2.2 billion contribution in April to its U.S. hourly pension plan.

"News on GM's pension is not good, but better than market expectations," said Merrill Lynch analyst John Casesa.

Investor concerns over the costly incentives and rising pension costs offset the favorable earnings report, and GM shares slipped $2.08, or 4.3 percent, to close at $45.84.

Income from the North American operations more than doubled in the second quarter, jumping to $1.2 billion from $521 million in last year's quarter. Production volume was nearly 14 percent higher in the most-recent quarter.

Trucks, which are considerably more profitable than cars, accounted for 54 percent of GM's total vehicles sales during the quarter, up from 52.2 percent in the year-earlier quarter.

GM's share of the U.S. car and light truck market totaled 28.1 percent in the second quarter, up from 27.3 percent during the second quarter last year.

Europe was a trouble area for GM. Devine said European operations were doing better than a year earlier but results there "are not yet acceptable."

European operations posted a loss of $115 million in the most recent quarter, vs. a deficit of $154 million in the 2001 quarter.

Looking ahead, GM officials said the company expects U.S. car and light truck sales to be in the mid- to high-16 million unit range this year.

The company predicted third-quarter earnings of 90 cents a share, excluding Hughes, and stands by its earlier forecast of $6 a share for the full year.

The Associated Press contributed to this article.

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