GM's profit nearly doubles in fourth quarter

Workers earn bonuses after year without them

January 17, 2003|By NEW YORK TIMES NEWS SERVICE

DETROIT - General Motors Corp. nearly doubled its per-share profit last year and beat Wall Street's expectations in the fourth quarter, bringing employee bonuses back to the world's largest automaker.

The company's performance was bolstered by its automotive operations in North America, with cost-cutting and strong sales offsetting the effects of a prolonged price war.

"Our strategy to leverage GM's size and fundamentally improve its operating efficiency continues to pay off," John F. "Jack" Smith Jr., GM's chairman, said in a statement.

But considerable challenges overhang GM this year, including pessimism about the industry sales outlook and an expected glut of new vehicles from surging competitors such as Nissan.

GM's huge pension and health-care obligations continue to be a focus of Wall Street scrutiny, as is the company's alliance with the troubled Italian automaker Fiat.

Top executives of the two companies are reportedly meeting this week.

For the year, GM reported net income of $1.7 billion, or $3.35 a diluted share, compared with income of $601 million, or $1.77 a share, in 2001.

Excluding one-time charges and the company's Hughes Electronics unit, which it has been trying to sell, GM reported operating earnings of $6.98 a share for last year, more than double its projections at the beginning of 2002.

Revenue rose to $186.8 billion last year, from $177.3 billion.

The strong performance means employees will receive bonuses in the first quarter, welcome news after no bonuses were handed out last year.

The company's 130,000 hourly workers in the United States will be eligible for average bonuses of about $940.

About 1,300 workers are employed at GM's Baltimore van plant on Broening Highway, which daily makes about 400 Chevrolet Astros and GMC Safaris.

"You always have a guess of where it might be, but it beat that expectation," said Burt Wagner, a top union official at a GM plant in Toledo, Ohio, referring to the results, which were shown on television throughout the plant today.

"It is good news," Wagner said. "People are optimistic."

$1 billion net

For the fourth quarter, GM reported net income of $1 billion, or $1.71 a diluted share, a sharp increase from earnings of $255 million, or 60 cents a share, in the fourth quarter of 2001.

Excluding the results at Hughes, GM reported operating earnings of $1.67 a share. Wall Street had been expecting the company to earn about $1.53 a share.

After an initial gain from the company's earnings report, GM stock fell 47 cents to close at $39.73 on the New York Stock Exchange.

Fourth-quarter revenue rose to $48.7 billion, from $46 billion, but was partly fueled by an incentive spending spree in December meant to ensure GM ended the year with an uptick in market share, which it did.

GM's net income from its key North American automotive operations surged to $3 billion last year from $1.5 billion in 2001.

The company's sales of light trucks - sport utility vehicles, pickups and minivans - continued to show strength, rising to 57.4 percent of total American sales last year from 48 percent in the late 1990s.

This trend - reflected across the industry - has been a source of great concern from many independent environmental and safety groups, but it has greatly helped profitability because automakers charge a premium for light trucks that is well above the extra costs of producing them.

Pension problem

On the flip side, pensions and health-care costs continue to be an albatross for a company that has shrunk considerably over the past several decades and has many more retirees than active workers.

Last year, GM had net cash flow of $1.3 billion, a figure that would have been much greater were it not for $5.8 billion in contributions to offset the company's pension and health-care obligations.

This year, the company has projected annual operating earnings of $5 a share, but it said it would have forecast earnings of $7.50 a share were it not for pension expenses.

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