GM world headquarters is right out my window, across the street. In fact, a few years
ago, they tried to annex City Hall , here where I am, but we progressive bureaucrats
fought that off, with a People vs the Monopoly campaign. Now , there is a class
struggle line just outside my office door, like the Berlin wall.
CB
((((((((((
General Motors profit woes spread
As worldwide income plunges, profit-sharing checks are slashed in half for U.S. workers
By Joe Miller and Daniel Howes / The Detroit News 1/18/2001
DETROIT -- The sharp drop in fourth-quarter earnings that General Motors Corp.
reported on Wednesday reflects how its automotive business is facing mounting pressure
in every region of the world.
After $1.8 billion in restructuring charges in the fourth-quarter, the automaker
posted a net loss from car and truck operations in North America, as well as Europe,
Asia and Latin America.
Overall, GM reported net income of $89 million for the three-month period, down
from $1.15 billion a year ago, while income from continuing operations totaled $609
million.
The weaker earnings will be felt immediately in the pockets of GM's 147,000 U.S.
factory workers, whose 2000 profit-sharing checks will fall to $800 from $1,775 for
1999.
While GM said 2000 revenues reached a record $183.3 billion, the company also
suffered a symbolic blow: it no longer will rank as the world's largest firm in terms
of annual revenues. Exxon Mobil Corp. and Wal-Mart Stores are now bigger.
And the outlook for the first half of 2001 is gloomy as U.S. car and truck demand
slows from last year's record levels and GM's overseas operations continue to
struggle.
"As we enter a more challenging period, GM's taking tough actions to reduce
structural costs, realign capacity and pursue growth opportunities to generate
consistently strong results," said GM Chairman John F. "Jack" Smith Jr.
The financial report comes as GM is moving to reorganize operations in the United
States and Europe. Last month, GM said it would phase out Oldsmobile, trim production
and cut its white-collar workforce by 10 percent. In the United State, it has trimmed
first-quarter car and truck output by 21 percent.
But the most red ink was spilled in Europe where GM reported a loss of $882 million
in the quarter. The company's sales have plummeted because new products have failed to
catch on in the increasingly competitive market.
The losses in Europe prompted the resignation Wednesday of Opel Chairman Robert W.
Hendry. He said he would step down from GM's German unit to take responsibility for
Opel's mounting losses.
The red ink at GM's global automotive operations nearly wiped out record earnings
at GM's finance arm, General Motors Acceptance Corp., and a $1.13 billion gain from
the sale of GM's satellite manufacturing business.
For the year, GM posted net profits of $4.5 billion, down from $6 billion in 1999.
GM's stock closed at $54.88, down 88 cents, in trading on the New York Stock Exchange.
Excluding a $939 million charge to phase out Oldsmobile and an additional $294
million plant restructuring charge, GM earned $979 million in North America last
quarter.
GM remains upbeat
GM remains cautiously optimistic about the new year.
"We're projecting to be marginally profitable (in the first quarter worldwide),"
Chief Financial Officer John Devine said.
"We're obviously working to do better on that, but that's going to be a chore given
the production reduction we've had in North America.
"We certainly expect to be stronger in the second half," Devine said, adding that
GM expects to meet analysts' earnings-per-share expectations for 2001 of $4.25.
But some on Wall Street remain skeptical.
"December was much weaker than anyone expected," said Rod Lache, an auto analyst at
Deutsche Banc Alex Brown. "I've got a pretty grim outlook for the next two years for
this company."
Market share drops
In addition to steeper fourth-quarter losses overseas, GM lost market share in
every region but Latin America and the Middle East in 2000.
More worrisome were the slow U.S. sales in December that forced GM and its
cross-town rivals Ford Motor Co. and DaimlerChrysler AG's Chrysler Group to radically
scale back production plans for the first quarter by idling plants.
"If the Big 3 automakers resolve their inventory overall in the first half and get
stable production levels, you're going to have much stronger earnings in the second
half of the year," said Wendy Beale Needham, an auto analyst with Credit Suisse First
Boston.
Devine, a veteran of Ford Motor Co. who joined GM in December, says production
cuts, new vehicles such as the 2002 Chevrolet TrailBlazer and more aggressive cost
reductions will boost GM's performance in the second half of 2001.
The wild cards remain Europe -- where GM lost $882 million for the quarter -- and
Isuzu Motors Ltd., GM's Japanese partner. GM lost $87 million in the quarter on its 49
percent stake in Isuzu.
Europe operations hurting
Europe looms as GM's most intractable problem in the coming year. GM Europe took a
$419 million charge in the fourth quarter, primarily to cover job cuts and the closure
of its Luton, England, plant.
The timing of Hendry's resignation, while long rumored, was surprising. He said the
move was intended to end damaging speculation that he soon would be replaced by former
BMW AG manufacturing chief Carl-Peter Forster.
"There is absolutely no doubt whatsoever that this is my personal initiative,"
Hendry said at a press conference Wednesday in Frankfurt, Germany. "No one asked me to
do this. In fact, several people asked me not to do this."
The departure of Hendry and the arrival of his replacement -- whom Hendry said
would be "European-born" -- would give Opel its fourth chairman in little more than
three years. But for the first time since 1989, that new boss would not be an
American.
It is undeniable that the financial performance for Ruesselsheim-based Opel has
steadily worsened since Hendry became chairman in November 1998.
Hendry attributed the slide to a sharp drop in new car sales in Germany and
slipping profit margins as customers gravitated to less profitable small cars
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