Wednesday, January 19, 2005

GM earnings fall 37 percent in 4th quarter

Automaker reports $3.7 billion profit for all of 2004 compared to $3.8 billion in previous year

By Ed Garsten / The Detroit News

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DETROIT - General Motors Corp. reported Wednesday that it earned $630 million in the fourth quarter, down 37 percent from the $1 billion it earned during the final three months of 2003. Citing rising health care costs, the automaker said it would look for more cost cuts this year.

Total revenues for the last quarter of 2004 were up 4.7 percent at $51.2 billion.

The results included $597 million in expenses. Special items accounted for a $61 million favorable effect. Excluding the special items, GM earned $569 million or $1.01 per share for the quarter, beating the 91 cents per share Wall Street estimate.

But global automotive operations were off roughly 40 percent from the fourth quarter of 2003 -$235 million versus $396 million a year ago.

For all of 2004, GM earned $3.7 billion or $6.51 per share including special items down from $3.8 billion or $7.14 per share.

Excluding special items, GM earned $3.6 billion or $6.40 per share for the year, up from $3.2 billion or $5.62 per share in 2003, beating Wall Street expectations of $6.31 per share. Total revenues were up 4.5 percent to a record $193 billion.

Earnings for GM's automotive operations were up slightly to $1.2 billion in 2004 compared with $1.1 billion last year.

"GM reported solid overall results in 2004, despite challenging competitive conditions in many markets around the globe," GM chairman and chief executive Rick Wagoner said in a statement.

The big disappointment was GM Europe, which lost $742 million in 2004, compared with a loss of $286 million in 2003. In the fourth quarter, GM Europe reported a loss of $345 million versus a loss of $66 million a year ago.

GM announced in October plans to cut roughly 20 percent of its work force in Europe _ about 12,000 jobs _ by the end of 2006 in hopes of saving about $600 million a year.

In the Asia Pacific region, GM reported record net income of $729 million, up from $577 million in 2003. But earnings were down in the fourth quarter to $117 million from $177 million a year ago.

"While sales in China slowed in the second half of the year, after the government took actions to slow rapid growth, GM China sold almost half a million vehicles in 2004, a 27 percent gain," Wagoner said.

GM's Latin America/Africa/Mid-East operations earned $85 million in 2004, a significant improvement from a loss of $331 million a year ago. That part of the business earned $47 million in the fourth quarter, compared with a $112 million year-ago loss.

GMAC, which accounted for the bulk of GM's profits last year, earned a record $2.9 billion in 2004, up from $2.8 billion in 2003. It earned $611 million in the fourth quarter, down slightly from record earnings of $630 million in the fourth quarter of 2003.

GMAC is forecast to generate net income of at least $2.5 billion in 2005.

"Going forward, we expect GMAC to continue to be a significant source of income for GM," Wagoner said.

GM's special charges in the fourth quarter _ which resulted in a slightly favorable effect on reported earnings _ included a gain on its holdings in XM Satellite Radio and a write-down of its investment in Fiat Automotive Holdings.

On a positive note, GM said its revenue per vehicle in North America rose to $19,698 in the fourth quarter from $19,311 a year ago.

The company announced it would pay its approximately 119,000 hourly workers in the United States profit sharing payments of about $195.

The company said it expects to record a small profit or break even during the first three months of this year, excluding any special items. Last week, GM warned it expected lower profits this year because of rising health-care costs.

"Health care costs are not in our control," John Devine, GM vice chairman and chief financial officer, said in a conference call Wednesday.

With pricing expected to be flat and expenses not likely to abate, Devine said cost-cutting measures would be "ramped up" this year by cutting jobs mainly through attrition and retirements.

"We think there is more productivity that can be achieved," he said.

The automaker has set a 2005 earnings target of $4 to $5 per share, excluding special items. The current Wall Street consensus is $4.78 a share.

GM earlier detailed fourth-quarter expenses of $597 million related to the closing of two plants, its investment in Fiat Auto SpA, and the write-off of unidentified assets.

In a filing Tuesday with the Securities and Exchange Commission, GM said the expenses, which total $1.06 a share, include $136 million for GM's investment in Fiat Auto SpA, $46 million to close a plant in Linden, N.J., and $32 million to close a van factory in Baltimore.

The automaker also listed an expense of $383 million for impairments of certain, unidentified product lines.

GM expects ongoing costs of about $10 million a month in Linden and $6 million per month in Baltimore to pay benefits to laid-off workers, the automaker said in the filing. The automaker also expects future expenses of $28 million for the environmental costs of shutting the plants.

GM is closing the Baltimore plant, eliminating 1,100 jobs, and idling 950 workers that remain at the plant in Linden.

Associated Press and Bloomberg News contributed to this report. You can reach Ed Garsten at (313)223-3217 or egarsten@detnews.com