|
GM speeds ahead in 3Q
|
 |
October 14, 1999: 3:53 p.m. ET
Automaker rebounds from 1998 strike, aided by strong U.S. market, truck sales
|
NEW YORK (CNNfn) - General Motors Corp. Thursday reported a big return to the black in its third quarter after a strike a year earlier, speeding past Wall Street forecasts amid a booming U.S. car market.
The world's largest automaker said earnings from continuing operations totaled $877 million, or $1.33 a diluted share, versus a loss of $309 million, or 52 cents a share, a year earlier when the strike hurt results.
Analysts expected GM to report income of $1.24 per share, according to a poll by the research firm First Call. Revenue rose 28 percent to $42.8 billion.
GM's bottom line took a $965 million hit, after taxes, in the third quarter last year as a result of two strikes at GM component plants in Flint, Mich.
Shares of GM (GM), one of 30 stocks in the Dow industrial average, closed down 1/8 to 65. GM bought back 5.7 million shares in the quarter.
Rising economic tide lifts all … cars
GM, like its rivals Ford and DaimlerChrysler, has enjoyed soaring North American sales that are on track for another record year amid the buoyant U.S. economy. GM profits in North America rose to $671 million after a loss of $595 million a year earlier.
"GM clearly benefited from the industry volumes being on the high side," said Nick Lobaccaro, an analyst with Lehman Brothers. "We expect things to be on a brisk pace, but think Ford may be better positioned for the long term."
Lobaccaro cited stronger truck sales, which were particularly hard hit by the strike, and an improved pricing environment that helped lift sticker prices by about $80 per car on average.'
In September, for the first time in GM's history outside of a strike month, the company sold more trucks than cars. GM's chief number cruncher said there are few signs that trend will let up.
"[It's] our best indication that the consumer five years from now is going to be more likely to buy a truck -- whether a pickup or a sport utility or a van or cross-over vehicle -- than is today's consumer," said Michael Losh, GM's chief financial officer, in an interview with CNNfn. "We do not think we've seen the end of the trend of people switching out of cars into trucks or cross-over vehicles."
"Despite continuing intense competitive pressures, GM North America had by far its best third-quarter financial results of the decade," GM President and Chief Operating Officer Richard Wagoner said. GM said its U.S. market share rose to 28.9 percent from 24.1 percent a year earlier.
One analyst said that GM's performance, riding a hearty economy, will be hard to continue down the road. Despite its cost-reduction initiatives, "it will be slow slogging to improve from this point," said Mark Altherr, a fixed-income analyst with Salomon Smith Barney.
Its Asian operations lost $54 million after breaking even last year, and its Latin American, African and Mideast unit narrowed its losses. GM said that it is encouraged by signs of Asia recovery.
Gary Lapidus, an analyst with Goldman Sachs, said GM's geographic sales mix "was not as good as we would have liked," with North American sales not as strong as he expected, while Latin American sales were better than he had predicted.
For the first nine months of 1999, GM reported earnings from continuing operations of $4.4 billion, or $6.67 per share, up from $1.4 billion, or $1.87 per share, a year ago. Revenue rose 17 percent to $130 billion.
How to treat Hughes?
Also dragging on GM's bottom line was the firm's Hughes Electronics (GMH) subsidiary, which said Wednesday it had a third-quarter loss of $30 million after reporting a profit in the prior year.
A looming question for GM is whether to spin off Hughes, which specializes in satellite and wireless communications and provides the DirectTV service, to reap the maximum value of each company, and make GM's stock more dependent on the solid auto businesses.
"It looks increasingly likely to us that GM will effect some kind of a transaction that will separate these two businesses," John Casesa, an analyst at Merrill Lynch, said. "These two companies will be worth more apart than they are together." 
|
|
|
General Motors
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
