GM Reports Second Quarter Financial Results

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July 23, 2003
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GM Reports Second Quarter Financial Results

Net income of $901 million, or $1.58 per share

Adjusted net income of $879 million, or $1.57 per share, excluding Hughes

Total automotive cash exceeded $23 billion

DETROIT - General Motors Corp. reported net income of $901 million, or $1.58 per diluted share of GM's $1-2/3 par value common stock, in the second quarter of 2003, compared with $1.3 billion, or $2.43 per share, in the second quarter of 2002. Total revenues of $48.3 billion were essentially unchanged from the prior-year quarter.

GM's adjusted income, which excludes results from Hughes, totaled $879 million, or $1.57 per share, in the second quarter of 2003. GM's adjusted net income in the second quarter of 2002 was $1.5 billion, or $2.63 per share, excluding Hughes and special items.

GM's second-quarter performance reflected continued strong automotive cash flow, record results at General Motors Acceptance Corp. (GMAC) where earnings of $834 million were nearly double the prior-year quarter, record net income of $163 million at GM Asia Pacific, an overall profit decline in the automotive sector primarily caused by difficult economic conditions in most of GM's automotive regions, and the effects of unfavorable currency-exchange rates in certain regions.

Continued cost reductions and a revitalized product portfolio drove improved financial performance to approximately breakeven at GM Europe. However, lower volumes and continuing pricing pressures in North America eroded profits despite aggressive cost reductions and improved revenue per unit.

GM financial results described throughout the remainder of this release exclude special items unless otherwise noted. See Highlights for reconciliation of adjusted results to results based on Generally Accepted Accounting Principles (GAAP).

Cash and Liquidity

GM generated $3.1 billion in cash in the second quarter of 2003. Automotive cash, marketable securities, and assets of the VEBA trust invested in short-term fixed-income securities totaled $23.7 billion at June 30, 2003, excluding financing and insurance operations and Hughes, compared with $20.6 billion on March 31, 2003. In addition, as reported earlier, GM raised an additional $13.2 billion in early July through new offerings of debt securities and convertible debt.

GM Automotive Operations

GM's global automotive operations earned $140 million in the second quarter of 2003, compared with $1.1 billion in the prior-year period. Global production declined 6.6 percent in the second quarter, compared with the same period in 2002.

GM North America (GMNA) earned $83 million in the second quarter of 2003, compared with $1.3 billion in the second quarter last year. Improvements in sales mix, material cost, and productivity were more than offset by a production decline of nearly 12 percent, intense pricing pressure, increased pension expense, and currency-exchange losses versus the year-ago period. The results also include the $168 million after taxes, or $0.30 per share, unfavorable effect of the storm damage and resulting loss of production at GM's Oklahoma City assembly plant. Strong quality performance allowed the corporation to reduce its policy and warranty reserves in the second quarter by $199 million after taxes, or $0.36 per share.

GM's quality and productivity gains were recognized recently in two major independent surveys. "GM's quality drive is on track, producing significant improvements that increasingly are being recognized by consumers and the marketplace," Wagoner said. The J.D. Power 2003 Vehicle Dependability Study showed Buick among the top three nameplates in long-term quality, and the best nameplate outside the luxury brands. General Motors overall was the only domestic manufacturer to score above the industry average, and 12 GM vehicles were in the top three of their respective segment rankings. "Our goal is to be the industry leader in all areas of quality, and this is another example of our progress toward achieving that goal," he said.

GM's U.S. market share was 27.9 percent in the second quarter of 2003, down slightly from 28.1 percent in the second quarter of 2002, but significantly improved from the 26.6 percent level in the first quarter this year.

GM Europe (GME) reported a loss of $3 million in the second quarter of 2003, a significant turnaround from a year ago when GME recorded a $115 million loss. Aggressive cost reductions and increased vehicle sales at Opel/Vauxhall and Saab drove these improved financial results, despite significant currency-exchange losses. GM Europe's market share in the second quarter increased 0.3 percentage points to 9.4 percent compared with the same period last year.

GM Asia Pacific earned a record $163 million in the second quarter of 2003, more than four times the $39 million earned in the year-ago quarter. Strong financial results at Shanghai GM and GM's Australia-based Holden continued to drive improved financial results along with improved equity earnings from GM's Japanese automotive alliances and lower-than-expected start-up losses at GM Daewoo Auto & Technology Co. "Our aggressive growth strategy in the rapidly expanding Asia-Pacific region is really paying off; we remain committed to further expand our presence in this key region," Wagoner said.

Continuing economic weakness in Brazil was the primary factor in GM Latin America/Africa/Mid-East (GMLAAM) region's $103 million loss in the second quarter of 2003, which compared with a loss of $73 million in the year-ago period. "Latin America is still suffering from economic uncertainty and weak auto markets," Wagoner said. "Our focus continues to be on wringing out costs while increasing our market share and strengthening our number-one position in the region."

GMAC

GMAC earned $834 million in the second quarter of 2003, its best-ever quarterly performance. The results were nearly double the $431 million earned in the same period last year.

Mortgage operations generated income of $415 million in the second quarter of 2003, up $357 million from the year-ago period, while earnings from financing operations were $396 million, up $49 million from the same period last year.

Hughes

Hughes Electronics earned $22 million in the second quarter of 2003, compared with a loss of $156 million in the prior-year period, led by a strong performance at DirecTV. Revenues increased 6.6 percent to $2.4 billion.

In the United States, DirecTV added 136,000 net subscribers in the second quarter of 2003, bringing the number of total U.S. subscribers to 11.6 million.

Looking Ahead

GM expects improving economic growth during the balance of 2003 in the United States, with total U.S. industry vehicle sales expected to be at least 16.5 million units for the calendar year. In Europe, especially Germany, economic and market conditions are expected to remain challenging in the second half of the year. Total European industry vehicle sales are estimated to be about 18.5 million units for 2003.

GM expects to beat the current analysts' consensus for the third quarter of approximately $0.50 per share, excluding Hughes and any special items, and expects automotive operations to be profitable. Despite the continuing economic uncertainty, GM is more optimistic about the outlook for the year, and now expects full-year 2003 earnings could range from the current analysts' consensus of approximately $4.50 up to $5.00 per share, excluding Hughes and any special items.

(July 17, 2003)

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