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FOR RELEASE: 2005-03-16
GM Revises Earnings Outlook
DETROIT – General Motors Corp. (NYSE: GM) said today that it is revising its first-quarter and calendar-year earnings guidance to reflect lower North American sales and production volumes, a tougher pricing environment, and a more car-based sales mix. At the same time, GM's other automotive regions and GMAC are all on track to meet or beat their 2005 net income targets.
"Clearly we have significant challenges in North America . The rest of our automotive businesses, and GMAC, are running in line with, or ahead of, our expectations," said GM Chairman and Chief Executive Officer Rick Wagoner. “But North America is our biggest business, and the key driver of automotive earnings and cash flow. So it's important that we get this business right."
GM said it now expects to report a loss of approximately $1.50 per fully diluted share in the first quarter of 2005, excluding special items, compared to a previous target of breakeven or better. For the calendar year, GM expects to report earnings of approximately $1.00 to $2.00 per share, excluding special items, compared to a previous target of $4.00 to $5.00 per share.
GM also expects negative operating cash flow in 2005 of approximately $2 billion, before the Fiat settlement and GM Europe restructuring, versus the previous target of positive $2 billion. This is primarily attributable to lower volumes and decreased net income at GM North America (GMNA). GM's 2005 corporate capital spending remains at approximately $8 billion, or $1 billion above 2004 levels.
GM's previous first-quarter earnings guidance was based on North American vehicle- production volume of 1.25 million vehicles. Since then, production schedules have been reduced by approximately 70,000 vehicles. In addition, the pricing environment has been more competitive than expected in North America .
"The competitive environment that we face in North America means we must continue to find ways to reduce our costs and grow revenue," said GM Vice Chairman and Chief Financial Officer John Devine. "While we have made good progress in reducing costs over the last several years, the projected loss in North America reinforces our need to do much more, particularly in the area of health care.
"At the same time, we expect to improve our revenue performance on the strength of our continuing stream of new cars and trucks, and our customer value-based marketing initiatives," Devine said. "We are also significantly increasing the marketing support for important core vehicles to build more customer awareness and consideration."
The company is encouraged by the building momentum of recently introduced cars and trucks, particularly the Chevrolet Equinox, Pontiac G6, Buick LaCrosse and Chevrolet Cobalt. The Equinox continues to gain share in the small-utility segment. Production of the Pontiac G6 is ramping up with two new engine choices and the segment’s first hardtop convertible and a sleek coupe coming in the near future. The LaCrosse continues to gain traction, with retail sales up 48 percent in February, compared with combined year-ago Century and Regal retail sales. The Chevrolet Cobalt continues to gain share in the entry-level segment and will gain further momentum with the availability of the Cobalt coupe just coming on line as well as more engine choices and a high performance SS model.
Looking ahead, GM intends to continue to aggressively strengthen its brand portfolio with the introduction this year of the Chevrolet HHR, Monte Carlo and Impala; the Hummer H3; the Pontiac Solstice, Torrent and G6 coupe; the Cadillac DTS; the Buick Lucerne; and the Saab 9-3 wagon and 9-7X.
“We are staying the course on our key product programs and, in fact, are planning to accelerate the introduction of some of our most important launches," Wagoner said. "Great cars and trucks are the key to success in this business, and so remain our top priority."
The outlook for GM's other business sectors and units remains positive. The turnaround at GM’s Latin America/Africa/Mid-East (GMLAAM) region continues to gain momentum and GM Asia Pacific (GMAP) remains on track. In Europe , GM continues to progress with its major structural-cost-reduction moves, including the agreements with its labor unions on employment reductions, while market share and revenue show an improving trend.
"GMAC is on target to exceed expectations, despite higher interest rates and wider borrowing spreads," Wagoner said. "Much of GMAC's success stems from its ability to diversify its funding sources. We're confident that GMAC can continue to sustain strong levels of profitability."
Fiat Settlement Charge Included in 2004 Results
GM will book an after-tax charge of $886 million, or $1.56 per fully diluted share, for the settlement agreement with Fiat S.p.A. (NYSE: FIA) in the fourth quarter of 2004.
GM also said it is adjusting certain financial information for each of the four quarters of 2004 to reallocate certain entries at GM and GMAC among the quarters. The adjustments relate mainly to asset valuation at GMAC’s residential mortgage businesses and revised accounting for the Medicare legislation. These changes do not affect total net income or earnings per share for the calendar year, nor do they affect the company's financial condition or cash flows for 2004.
The following is a summary of the effect of the charge relating to the Fiat settlement and the above-mentioned adjustments:
Change in EPS
Q1-2004
Q2-2004
Q3-2004
Q4-2004
CY 2004
Quarterly
Reallocation
$(0.13)
$0.06
$(0.22)
$0.28
$0.00*
Fiat Charge
$(1.56)
$(1.56)
*Note: The quarterly adjustments reflect variations in the number of shares outstanding for each period.
Additional detail will be included in the GM and GMAC annual reports on Form 10-K, which will be filed with the U.S. Securities and Exchange Commission later today.
Conference Call Information:
General Motors has scheduled a conference call today at 9:00 a.m. EST to discuss its first quarter guidance. To access the conference call, please dial 1-800-254-4299 (or 1-212-271-4629 for international access) 10 minutes prior to the start time and ask to be connected to the General Motors conference call. A taped replay of this call will be made available from 11:00 a.m. EST, March 16, 2005, until 11:00 a.m. EST, March 18, 2005. Please dial 1-800-633-8284 (or 1-402-977-9140 for international access) and enter reservation number 21235792 to access the replay.
General Motors Corp., the world’s largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM today employs about 324,000 people around the world. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. In 2004, GM sold nearly 9 million cars and trucks globally, up 4 percent and the second-highest total in the company’s history. GM’s global headquarters are at the GM Renaissance Center in Detroit. More information on GM can be found at www.gm.com.
# # #
In this press release and related comments by General Motors management, our use of the words "expect," "anticipate," "estimate," "project," "forecast," "outlook," "target," "objective," "plan," "goal," "pursue," "on track," and similar expressions is intended to identify forward-looking statements. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K (at page II-20) which may berevised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: changes in economic conditions; currency-exchange rates or political stability; shortages of fuel, labor strikes or work stoppages; market acceptance of the corporation's new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and, the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and times planned by management.
FOR RELEASE: 2005-03-16
GM Revises Earnings Outlook
DETROIT – General Motors Corp. (NYSE: GM) said today that it is revising its first-quarter and calendar-year earnings guidance to reflect lower North American sales and production volumes, a tougher pricing environment, and a more car-based sales mix. At the same time, GM's other automotive regions and GMAC are all on track to meet or beat their 2005 net income targets.
"Clearly we have significant challenges in North America . The rest of our automotive businesses, and GMAC, are running in line with, or ahead of, our expectations," said GM Chairman and Chief Executive Officer Rick Wagoner. “But North America is our biggest business, and the key driver of automotive earnings and cash flow. So it's important that we get this business right."
GM said it now expects to report a loss of approximately $1.50 per fully diluted share in the first quarter of 2005, excluding special items, compared to a previous target of breakeven or better. For the calendar year, GM expects to report earnings of approximately $1.00 to $2.00 per share, excluding special items, compared to a previous target of $4.00 to $5.00 per share.
GM also expects negative operating cash flow in 2005 of approximately $2 billion, before the Fiat settlement and GM Europe restructuring, versus the previous target of positive $2 billion. This is primarily attributable to lower volumes and decreased net income at GM North America (GMNA). GM's 2005 corporate capital spending remains at approximately $8 billion, or $1 billion above 2004 levels.
GM's previous first-quarter earnings guidance was based on North American vehicle- production volume of 1.25 million vehicles. Since then, production schedules have been reduced by approximately 70,000 vehicles. In addition, the pricing environment has been more competitive than expected in North America .
"The competitive environment that we face in North America means we must continue to find ways to reduce our costs and grow revenue," said GM Vice Chairman and Chief Financial Officer John Devine. "While we have made good progress in reducing costs over the last several years, the projected loss in North America reinforces our need to do much more, particularly in the area of health care.
"At the same time, we expect to improve our revenue performance on the strength of our continuing stream of new cars and trucks, and our customer value-based marketing initiatives," Devine said. "We are also significantly increasing the marketing support for important core vehicles to build more customer awareness and consideration."
The company is encouraged by the building momentum of recently introduced cars and trucks, particularly the Chevrolet Equinox, Pontiac G6, Buick LaCrosse and Chevrolet Cobalt. The Equinox continues to gain share in the small-utility segment. Production of the Pontiac G6 is ramping up with two new engine choices and the segment’s first hardtop convertible and a sleek coupe coming in the near future. The LaCrosse continues to gain traction, with retail sales up 48 percent in February, compared with combined year-ago Century and Regal retail sales. The Chevrolet Cobalt continues to gain share in the entry-level segment and will gain further momentum with the availability of the Cobalt coupe just coming on line as well as more engine choices and a high performance SS model.
Looking ahead, GM intends to continue to aggressively strengthen its brand portfolio with the introduction this year of the Chevrolet HHR, Monte Carlo and Impala; the Hummer H3; the Pontiac Solstice, Torrent and G6 coupe; the Cadillac DTS; the Buick Lucerne; and the Saab 9-3 wagon and 9-7X.
“We are staying the course on our key product programs and, in fact, are planning to accelerate the introduction of some of our most important launches," Wagoner said. "Great cars and trucks are the key to success in this business, and so remain our top priority."
The outlook for GM's other business sectors and units remains positive. The turnaround at GM’s Latin America/Africa/Mid-East (GMLAAM) region continues to gain momentum and GM Asia Pacific (GMAP) remains on track. In Europe , GM continues to progress with its major structural-cost-reduction moves, including the agreements with its labor unions on employment reductions, while market share and revenue show an improving trend.
"GMAC is on target to exceed expectations, despite higher interest rates and wider borrowing spreads," Wagoner said. "Much of GMAC's success stems from its ability to diversify its funding sources. We're confident that GMAC can continue to sustain strong levels of profitability."
Fiat Settlement Charge Included in 2004 Results
GM will book an after-tax charge of $886 million, or $1.56 per fully diluted share, for the settlement agreement with Fiat S.p.A. (NYSE: FIA) in the fourth quarter of 2004.
GM also said it is adjusting certain financial information for each of the four quarters of 2004 to reallocate certain entries at GM and GMAC among the quarters. The adjustments relate mainly to asset valuation at GMAC’s residential mortgage businesses and revised accounting for the Medicare legislation. These changes do not affect total net income or earnings per share for the calendar year, nor do they affect the company's financial condition or cash flows for 2004.
The following is a summary of the effect of the charge relating to the Fiat settlement and the above-mentioned adjustments:
Change in EPS
Q1-2004
Q2-2004
Q3-2004
Q4-2004
CY 2004
Quarterly
Reallocation
$(0.13)
$0.06
$(0.22)
$0.28
$0.00*
Fiat Charge
$(1.56)
$(1.56)
*Note: The quarterly adjustments reflect variations in the number of shares outstanding for each period.
Additional detail will be included in the GM and GMAC annual reports on Form 10-K, which will be filed with the U.S. Securities and Exchange Commission later today.
Conference Call Information:
General Motors has scheduled a conference call today at 9:00 a.m. EST to discuss its first quarter guidance. To access the conference call, please dial 1-800-254-4299 (or 1-212-271-4629 for international access) 10 minutes prior to the start time and ask to be connected to the General Motors conference call. A taped replay of this call will be made available from 11:00 a.m. EST, March 16, 2005, until 11:00 a.m. EST, March 18, 2005. Please dial 1-800-633-8284 (or 1-402-977-9140 for international access) and enter reservation number 21235792 to access the replay.
General Motors Corp., the world’s largest automaker, has been the global industry sales leader since 1931. Founded in 1908, GM today employs about 324,000 people around the world. It has manufacturing operations in 32 countries and its vehicles are sold in 200 countries. In 2004, GM sold nearly 9 million cars and trucks globally, up 4 percent and the second-highest total in the company’s history. GM’s global headquarters are at the GM Renaissance Center in Detroit. More information on GM can be found at www.gm.com.
# # #
In this press release and related comments by General Motors management, our use of the words "expect," "anticipate," "estimate," "project," "forecast," "outlook," "target," "objective," "plan," "goal," "pursue," "on track," and similar expressions is intended to identify forward-looking statements. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K (at page II-20) which may berevised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: changes in economic conditions; currency-exchange rates or political stability; shortages of fuel, labor strikes or work stoppages; market acceptance of the corporation's new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and, the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and times planned by management.
