GM puts 3rd-quarter loss at $804 million

Fiat expense tied to debt in otherwise `good' report

stock jumps 10 percent

October 16, 2002|By Ted Shelsby | Ted Shelsby,SUN STAFF

General Motors Corp. reported yesterday a third-quarter loss of $804 million, which it attributed primarily to a $1.37 billion expense related to its investment in Italy's Fiat Auto Holdings and other one-time charges.

Despite the big splash of red ink, John Devine, chief financial officer of the world's largest automaker, called the three months ended Sept. 30 "a good quarter" based on continuing operations.

Wall Street agreed. GM's shares rose more than 10 percent, posting their biggest one-day gain since October 1987 - $3.44 - to close at $36.44.

Profit at GM's North American auto operations, which accounts for about half the company's sales, rose more than 14 percent for the quarter, leading GM to raise its estimate of year-end earnings to $6.75 a share from $6.50. The company also stood by its previously announced goal of earning $10 a share by the mid-decade.

Excluding Fiat and its involvement in Hughes Electronics' satellite television business, GM posted earnings of $696 million, or $1.24 a share, a 30 percent improvement over the third quarter of last year and easily beating Wall Street's expectations of 99 cents a share for the quarter.

"North America looked pretty good," said Dan Poole, vice president of equity research at National City Corp, which holds more than 260,000 shares of GM. "This was better than we thought."

The net loss of $804 million is equal to $1.42 a share. This compares with a loss of $368 million, or 41 cents a share, in the corresponding quarter of last year.

Third-quarter sales climbed nearly 3 percent to $43.58 billion, from $42.78 billion last year.

"A steady stream of successful products and a rigorous cost focus continue to move us in the right direction," G. Richard Wagoner Jr., GM's president and chief executive, said in releasing the third-quarter results.

During a conference call with analysts and reporters, Devine expressed disappointment over the Federal Communication Commission's move last week to halt its sale of Hughes to Echo- Star Communications Corp. He said the company will continue to work with regulators to resolve the issue and has alternative plans for Hughes if an agreement can't be reached. He declined to discuss the alternatives. Hughes lost $81 million in the quarter.

Devine said the market value of the company's pension fund assets dropped 10 percent during the first nine months of the year. If that trend continues, he said, it could increase the company's pension expenses next year to $1.6 billion.

Bloomberg News contributed to this article.

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