FOCUS-GM earnings jump 13 percent to $1.8 billion - Reuters
Wednesday, January 20, 1999 03:18 PM
By Michael Ellis
DETROIT, Jan 20 (Reuters) - General Motors Corp., the world's largest
automaker, said its fourth-quarter profit jumped 13 percent to $1.8
billion due to its strong core North American operations and aggressive
cost-cutting, but results still fell short of Wall Street's expectations.
GM (Nyse:GM) said profits, equal to $2.61 a diluted share, rose from $1.7
billion, or $2.33 a diluted share, a year earlier. The result was slightly
below the $2.65 a share expected by Wall Street analysts surveyed by First
Call Corp.
GM's stock, which jumped more than $4 to a 52-week high Wednesday, was up
$2.375 to $90.375 on the New York Stock Exchange.
Included in the fourth quarter were total after-tax charges of $420
million to cover the costs of an employee separation program and
underperforming assets overseas. Without the special items, GM said its
fourth-quarter earnings would have been $2.2 billion or $3.28 a share.
Revenues for the quarter rose to $46.4 billion from $42.9 billion after
the company ramped up production to recover from labor strikes at two
parts plants last summer. GM reached full production of its new, and
highly profitable, full-size pickup trucks a month earlier than planned.
However, worldwide sales were flat at 2.2 million.
For the year, GM's earnings fell by more than half to $3 billion because
of the strikes, compared to $6.3 billion. Total sales fell to $161 billion
from $167 billion.
GM's fourth-quarter results were driven by its North American automotive
operations, where net income more than doubled to $1.7 billion from $650
million. That gave the unit a net income margin of 6 percent, its best
level in recent history, GM said.
After taking into account $277 million in losses in Latin America, the
Middle East, Africa and Asia, the company's total income from automotive
operations was $1.5 billion vs. $831 million. GM's European automotive
operations had a $146 million profit vs. $31 million a year earlier.
The company's Delphi Automotive Systems supply unit earned $280 million
vs. $349 million.
The strong results allowed GM to restore its cash and marketable
securities, ending the quarter with $14.1 billion. GM said it needs at
least $13 billion to fund capital spending, pension plans and maintain
shareholder initiatives. GM had $17.5 billion at the end of last year's
fourth quarter, and $11.5 billion at the end of the 1998 third period.
"We came back strong following the work stoppage in mid-year and we intend
to keep this momentum going in the future," Chairman Jack Smith said in a
statement.
GM in the first quarter will resume the share buyback program it suspended
last year during the strikes with the expectation of completing it by the
end of this year. Since January 1997, GM had spent $6.3 billion of the
total $9 billion program to buy back 102 million shares.
GM also said it will redeem its Series B 9-1/8 preference shares in the
near future.
Smith said the company expects to maintain its momentum in the United
States and European markets, where the conditions are expected to remain
strong in 1999. But he warned that Asia and Latin America will continue to
pose challenges this year.
Separately, GM said it will pay about $200 each in 1998 profit-sharing
checks to 231,000 employees in the United States. Last year, employees
received $750 each.
About 70,000 eligible salaried workers in the United States and Canada
will also receive incentive payments for 1998. The amount is 1 percent of
the employee's base salary or $200, whichever is higher.
Ford Motor Co. (Nyse:F) is scheduled to post its earnings on Thursday.
DaimlerChrysler AG (Nyse:DCX) has said it will release year-end results in
February or March.
(Detroit Newsroom, 313-870-0200)
Quote for referenced ticker symbols: GM, F, DCX
© 1999, Reuters
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