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GM Posts Profit, Helped by Its Financing Division

October 16, 2003|From Bloomberg News

General Motors Corp., the world's largest automaker, reported a $425-million third-quarter profit Wednesday as the company earned about 19 times as much from its finance arm as from selling cars and trucks.

Net income amounted to 79 cents a share. That contrasts with a net loss of $804 million, or $1.42 a share, a year earlier, when the company wrote down its investment in Fiat's auto unit. Sales rose 5.4% to $45.9 billion.

Profit from making cars and trucks fell 91% as Chief Executive Rick Wagoner cut production in North America, GM's biggest market, and offered deeper discounts. Earnings at General Motors Acceptance Corp., which finances autos and homes and sells insurance, rose 32%.

Shares of Detroit-based GM dropped 42 cents to $43.55 on the New York Stock Exchange.

GM, Ford Motor Co. and DaimlerChrysler's Chrysler unit have increased spending on rebates and no-interest loans in an effort to halt market-share losses to Japanese automakers Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.

General Motors spent $4,219 per vehicle on incentives in the U.S. during the third quarter, up 24% from the 2002 period, according to CNW Marketing Research. The incentives helped boost General Motors' U.S. sales 0.7% in the quarter and its market share to 29% from 28.4%.

GM is "going after the jugular," said Maryann Keller, an automotive analyst at Maryann Keller & Associates. She expects GM to gain market share "from more vulnerable companies" such as Ford and Chrysler.

Profit from General Motors' global auto operations fell to $34 million, as North American profit fell 76% to $128 million. The company's North American production fell about 5%.

Profit at General Motors Acceptance climbed to $630 million, helped by a 65% rise in mortgage earnings and by insurance profit that more than doubled. Profit from auto financing rose 5.6%.

The finance unit's profit margin was 8.4%, compared with 0.1% for auto operations, which represented 78% of revenue.

GM expects to earn about 95 cents a share in the fourth quarter, including its Hughes Electronics unit and excluding certain items. The forecast excludes a possible $1-billion gain from the sale of Hughes to News Corp. and certain other costs.

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