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GM Earns $1.7 Billion in 2002


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General Motors Corp. boosted its earnings nearly four-fold during the last three months of 2002 as strong sales and a continuing emphasis on cost cutting produced strong results.
The giant automaker reported it earned $1 billion, or $1.71 a share, during the fourth quarter, compared with $255 million, or 60 cents a share, in the same period a year ago as revenue climbed to a record $48.7 billion.

John Devine, GM’s chief financial officer, said the heavy use of incentives, particularly in December when GM’s market share soared past 32 percent, helped drive revenue higher.
GM said its net price on vehicles was off 3.2 percent in the fourth quarter compared with the year-ago period and Prudential Securities estimated the pricing decline cost the automaker $1.18 a share for the quarter.

Devine, however, shrugged off the persistent questioning about incentives during a conference call with analysts and reporters. “We obviously want to improve our margins, but we’re going to be competitive in the market place,” Devine added.

2002 results

GM’s CFO also said the automaker’s objective in 2002 was to grow its market share in each of the four global markets in which it operates, including North America, where its market share improved for the second year in a row.

For 2002, GM earned $3.9 billion or $6.98 per share, excluding the impact of Hughes Electronics, on the automaker’s bottom line. With Hughes in the mix, GM earnings totaled $1.7 billion or $3.35 per share. GM also generated more than $11 billion in cash. In addition, GMAC posted its eighth consecutive year of earnings growth, Devine said.

G. Richard Wagoner said in a statement that accompanied the financial report that GM had delivered strong results despite some very challenging economic conditions. “Strong launches of well-received products, aggressive marketing, improved quality and productivity and continued cost reductions were the primary drivers,” Wagoner said.

“Our strategy to leverage GM’s size, and fundamentally improve its operating efficiency continues to pay off,” said GM Chairman John F. Smith Jr. “We’re a far leaner, more flexible company, offering cars and trucks that are winners in the marketplace, which continues to drive our improved earnings,” Smith added.

In the past decade, GM has gone from being the high-cost producer to a low-cost producer, competitive with transplants operated by Japanese rivals such as Toyota and Honda.
GM executives said last week North American Operations and General Motors Acceptance Corp. will continue to produce strong results throughout 2003.

Sales have slowed some in January but the industry still appear to running at an annualized rate of about 16 million units, which is within the lower range of GM’s current forecast and suggests sales will reach the 16.5 million-unit pace GM expects in 2003, Devine added.

Nevertheless, some of the gains from the North American car and truck business and GMAC will be offset by the need to funnel more cash into the company’s underfunded pension fund and its lagging operations in Europe, which are expected to struggle just to break even.
The goal for Europe is to break even or hold losses to under $200 million. Latin America is also expected to produce relatively poor results but will be offset by GM’s growing business in Asia this year.

The extra pension expense of $3 billion before taxes and the continuing woes in Europe, as well as a slowdown in sales in the U.S., will reduce earnings to $5 per share, excluding Hughes Electronic Corp.

Devine said rising health-care costs also continue to be a major expense. GM expects its total bill for health care to rise 7 percent or nearly $500 million in 2003.

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