Good news.... market share increasedquote:
For Release: July 20, 2005
GM Reports Second-Quarter Financial Results
* Adjusted loss $0.56 per share, reported loss $0.51 per share
* GM North America posts loss, all other operating units profitable
* Global market share 15.2 percent, up 0.5 point
DETROIT- General Motors Corp. (NYSE: GM) today reported a loss of $318 million, or $0.56 per diluted share, in the second quarter of 2005, excluding special items and a tax-rate adjustment. These results compare with net income of $1.4 billion, or $2.42 per share, in the second quarter of 2004. Revenue was $48.5 billion, compared with $49.3 billion a year ago.
For the second quarter of 2005, GM reported a loss of $286 million, or $0.51 per share, including special items. The special items include a $126-million restructuring charge at GM Europe, and recognition of the recurring tax benefits above those reflected in the 15-percent rate used in GM's adjusted earnings. These items had a net favorable effect of $32 million, or $0.05 per share.
"Our second quarter results reflect a mix of some important pluses and minuses," GM Chairman and Chief Executive Officer Rick Wagoner said. "On the positive side, sales were up in all regions and global market share increased as our new cars and trucks continued to gain traction and show strong customer acceptance. In addition, financial results were positive in four of our operating units, with GMAC and GM Latin America/Africa/Mid-East continuing their recent favorable performance and GM Europe and GM Asia Pacific showing significant improvement from the first quarter.
"But, importantly, on the minus side, GM North America's financial performance continued to be very disappointing. While the results reflect a significant reduction in U.S. dealer inventory, with second-quarter inventories down 349,000 units from mid-year 2004 and 224,000 units from the first quarter of 2005, they also re-emphasize the need for us to significantly improve our cost structure in all major areas - material costs, productivity, capacity utilization and especially health care."
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).
GM Automotive Operations
GM's global-automotive operations reported a loss of $948 million in the second quarter of 2005, as profitable results in Europe, Asia and the Latin American/Mid-East region were more than offset by losses in North America. GM's global-automotive operations earned $579 million in the prior-year period. GM's global market share rose to 15.2 percent in the second quarter of 2005, compared with 14.7 percent in the year-ago period, and worldwide deliveries were up more than 10 percent.
GM North America (GMNA) reported a loss of $1.2 billion in the second quarter of 2005, compared with earnings of $355 million in the second quarter of 2004. GM's market share in North America rose to 27.3 percent in the second quarter of 2005, up from 26.2 percent in the year-ago quarter.
GMNA's second-quarter 2005 results were adversely affected by lower production volumes - down 142,000 units from the year-ago quarter, a less favorable product mix and increased health-care costs. Sales were up as a result of improved acceptance of new products and highly successful marketing programs. The combination of lower production and stronger sales helped to significantly reduce U.S. dealer inventories during the quarter to just over 1 million vehicles.
"The inventory reduction in the second quarter is a real positive," Wagoner said. "That, plus the strong sales of our new products like the Chevrolet Cobalt and the Hummer H3 and the favorable results of the recent J.D. Power Initial Quality and Vehicle Dependability reports, are indicators that our intense focus on product excellence is paying dividends. We also continue to progress in the re-tooling of our sales and marketing strategy, including the successful value-based consumer marketing program in June.
"Where we are not yet making the progress we need is on the cost side of the business. With the intense competitive conditions and pricing pressures continuing in the North American market, it's clear that we need to move faster in implementing the key cost reduction strategies that I outlined at our recent Annual Meeting -- re-energizing our global sourcing efforts, improving U.S. capacity utilization and achieving fully competitive productivity levels," Wagoner said. "Finally, our health-care cost situation remains an extreme burden on our ability to compete; we continue to work intensely on solutions to this crisis with our labor unions."
GM Europe (GME) reported earnings of $37 million in the second quarter of 2005, compared with a loss of $45 million in the year-ago quarter. These results reflect continued improvement in cost reduction and the favorable effects of the company's restructuring efforts. GM's market share in Europe was 9.7 percent in the second quarter of 2005, unchanged from the year-ago period.
"We're pleased to achieve our first profitable quarter in five years in Europe, excluding restructuring costs, as GM Europe continues to make significant progress in its turnaround plan," Wagoner said. "The Opel/Vauxhall Astra remains a strong contributor to our overall results in Europe, and we're encouraged by the positive reviews of the new Zafira. We still have work to do in Europe to achieve sustainable profitability, but the improved results so far this year indicate we're on the right track."
GM Asia Pacific (GMAP) earned $176 million in the second quarter of 2005, up significantly from the $60 million in the first quarter of this year, but below the $259 million earned in the year-ago quarter. GM's market share in the Asia-Pacific region rose to 6.3 percent in the second quarter from 5.6 percent a year ago, led by gains in China and Thailand. GM continues to turn in a solid performance in China with sales growing 37 percent in the second quarter, compared with an overall industry average of 17 percent. GM's market share in China rose to 11.4 percent in the second quarter of 2005, up from 9.8 percent in the year-ago period.
"Our performance in China continues to be encouraging, especially considering our modest presence there just a few years ago," Wagoner said. "Going forward, we intend to capitalize on our momentum in China and take full advantage of the opportunities presented by this large and rapidly growing market. With the rollout of additional new vehicles in the second half of the year and the strength of our current lineup, we anticipate double-digit sales growth to continue in the second half of 2005."
GM Daewoo Auto and Technology Co. delivered strong results in the second quarter of 2005, with sales gains in both the domestic and international markets. During the quarter GM increased its stake in GM Daewoo to 50.9 percent from 48.2 percent. As a result, GM has begun to consolidate GM Daewoo's financial results.
"GM Daewoo has rapidly become a valuable contributor to the GM family, particularly with its growing role in GM product programs in the Asia Pacific region and around the world," Wagoner said. "Our increased investment is consistent with our strategy to further develop GM Daewoo as a major player in our global product development system."
GM Latin America/Africa/Mid-East (GMLAAM) earned $33 million in the second quarter of 2005, compared with net income of $10 million a year ago. The latest results reflect higher sales volumes in most markets and continued progress on cost reduction. GM's market share in the LAAM region rose to 18.3 percent in the second quarter of 2005 from 17.1 percent a year ago.
"We're pleased with the overall results in the region, and particularly our performance in the Mid-East and African areas, where GM's market share was up 2.8 percentage points in the second quarter of 2005," Wagoner said.
GMAC
General Motors Acceptance Corp. (GMAC) reported net income of $816 million in the second quarter of 2005, compared with $846 million in the second quarter of 2004, as lower earnings from financing operations were partially offset by increased earnings from mortgage and insurance operations.
"GMAC once again reported impressive earnings despite a difficult funding environment and lower credit ratings," Wagoner said. "During the quarter, Residential Capital Corp., the newly formed holding company for GMAC's residential mortgage businesses, successfully completed its first global funding, raising $4 billion in a private placement. Our ongoing objective for GMAC is to ensure access to ample liquidity on a cost-competitive basis, while maintaining and building the extensive mutual synergies between GMAC and GM."
GMAC's financing operations earned $378 million in the second quarter of 2005, down from $452 million a year ago, reflecting lower net interest margins that were partially offset by improved used vehicle prices and favorable credit experience.
Mortgage operations earned $338 million in the second quarter of 2005, up from the $319 million in the second quarter of 2004. GMAC's mortgage operations benefited from gains on its investment portfolio and favorable net servicing results. This was partially offset by increased borrowing costs and lower gains on sales of loans.
Insurance operations reported earnings of $100 million in the second quarter of 2005, up from the $75 million in the second quarter of 2004. Continued improvement in net underwriting revenue due to favorable loss experience contributed to the increase in earnings quarter over quarter.
GMAC continued to maintain adequate liquidity, with a total of $22.2 billion in cash and certain marketable securities as of June 30, 2005. GMAC also provided a significant source of cash flow to GM through the payment of a $500 million dividend in the second quarter, bringing total dividends paid to date in 2005 to $1 billion.
Cash and Liquidity
Cash, marketable securities, and readily available assets of the Voluntary Employees' Beneficiary Association (VEBA) trust, excluding financing and insurance operations, totaled $20.2 billion at June 30, 2005, up from $19.8 billion on March 31, 2005. During the second quarter, GM withdrew $1 billion from the VEBA trust to pay for retiree health care. On July 1, 2005, GM withdrew an additional $1 billion from the VEBA.
Bad news..... still a loss.
