GM's Rough Ride Ahead
By LouAnn Lofton (TMF Bling)
April 15, 2003
General Motors (NYSE: GM) posted higher first-quarter earnings this morning, but it's the automaker's dim outlook for the rest of the year that got investors' attention.
Earnings for the world's largest car manufacturer jumped to $1.48 billion, including a one-time gain of $505 million from the sale of its defense division. Stripping out that gain, and results from Hughes (NYSE: GMH), a chunk of which GM recently unloaded, the company earned $978 million, or $1.81 a share. That compares to $791 million, or $1.39 a share, on the same basis last year.
Its total revenues rose 6.9% to $49.4 billion. Excluding Hughes, sales were up 4.8% to $46.3 billion, evidence that the company's extensive incentive campaign is still driving demand for its cars and trucks, though at a slower rate.
Its automotive operations earned $546 million during the quarter, ahead of the prior period's $496 million. But its North American operations slipped, earning only $548 million versus $654 million, indicating that Detroit's 0% price war is finally eating into bottom-line results, at least for this division. Its U.S. market share also weakened, down to 26.6% from 28.2%.
The financing impact could spread to the rest of its results, based on the company's outlook for its second quarter and the rest of the year. GM said it anticipates earning $1.00 a share for Q2, while analysts expect an average of $1.54 a share. The company earned $2.63 a share last year.
For all of 2003, GM also isn't certain it will earn the expected $5.00 a share for the year, blaming "uncertain economic conditions around the globe." You have to wonder if perhaps it should blame itself a little, since it started the aggressive financing campaign after Sept. 11, 2001 and continues to up the ante for the industry.
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