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15.10.2002

GM reports third quarter earnings

General Motors Corp. today reported that earnings in the third quarter of 2002. GM Europe (GME) reported a loss of $180 million in the third quarter of 2002, an improvement from the $287 million loss in the year-ago period.

-	GM EARNED $696 MILLION, OR $1.24 PER SHARE, EXCLUDING SPECIAL ITEMS AND HUGHES
-	NET LOSS TOTALS $804 MILLION, OR $1.42 PER SHARE, INCLUDING HUGHES AND SPECIAL ITEMS
-	STRONG CASH FLOW AND MARKET SHARE PERFORMANCE
-	2002 EARNINGS ESTIMATED AT $6.75 PER SHARE, UP FROM $6.50

General Motors Corp. today reported that earnings in the third quarter of 2002, excluding special items and Hughes, totaled $696 million, or $1.24 diluted earnings per share of GM $1-2/3 par value common stock, an improvement of more than 30 percent compared with the same period last year.

The increase was primarily driven by strong market performance and aggressive cost reductions at GM North America (GMNA), and continuing strength at General Motors Acceptance Corp. (GMAC). The results compare with income of $527 million, or $0.94 per share, in the third quarter of 2001, excluding Hughes and special items.

Including Hughes and special items, GM had a reported net loss of $804 million, or $1.42 diluted earnings per share, compared with a loss of $368 million, or $0.41 per share, in the third quarter of 2001.

The third-quarter-2002 results include special items totaling an unfavorable $1.42 billion, or $2.62 per share. This includes an unfavorable $1.37 billion after-tax ($2.2 billion pretax) non-cash impairment write-down of GM's investment in Fiat Auto Holdings, B.V., resulting from the completion of the previously announced study of GM's original

$2.4 billion carrying value for that investment; an unfavorable $116 million after-tax ($186 million pretax) net charge related to post-employment benefits and asset write-downs as a result of changes in GMNA's production footprint – primarily costs associated with the transfer of commercial truck production from Janesville, Wis., to Flint, Mich.; and a favorable $68 million after-tax ($109 million pretax) net gain at Hughes primarily resulting from the sale of equity interests. Special items in the third quarter of 2001 totaled an unfavorable $753 million, or $1.26 per share.

GM financial results described throughout the remainder of this release exclude special items unless otherwise noted.

"The strong performance by GM North America and GMAC demonstrate our ability to produce improved results despite a difficult pricing environment," said GM Chairman Jack Smith.

"A steady stream of successful products and a rigorous cost focus continue to move us in the right direction," said GM President and Chief Executive Officer Rick Wagoner. "We're designing winning cars and trucks, producing them efficiently, and maintaining our leadership position in the market. Our operations in North America are running very well, and we're striving for the same level of performance in other regions. We continue to face challenges, but our strong operating performance is the key to addressing them."

GM's net liquidity, excluding GMAC and Hughes, increased approximately $700 million from June 30, 2002, to $3.3 billion at Sept. 30, 2002. Automotive operations generated about $600 million of cash flow during the quarter. On that same basis, cash, marketable securities, and assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in short-term fixed-income securities increased to $18.2 billion at Sept. 30, 2002, from $17.6 billion at June 30, 2002. Debt, excluding GMAC and Hughes, decreased slightly to $14.9 billion at the end of the third quarter of 2002, compared with $15.0 billion at June 30, 2002.

Strong cash generation is vital to meet the challenges posed by weak returns in the equity markets and the increasing cost of employee benefits that continue to adversely affect GM's balance sheet. GM disclosed today that through the first nine months of 2002 the return on assets held in the U.S. hourly and salaried employee pension funds was approximately negative 10 percent. During this same period, the overall U.S. equities market declined more than 25 percent, as measured by the major stock indices. The fund performance year to date, combined with other factors, is expected to result in a significant increase in the unfunded status of the pension funds and an increase in 2003 pension expense.

GM AUTOMOTIVE OPERATIONS
GM's global automotive operations earned $345 million in the third quarter of 2002, an increase of more than 60 percent compared with the $212 million earned in the prior-year period.

Income at GM North America (GMNA) increased more than 14 percent in the third quarter of 2002 to $510 million, compared with $445 million earned in the year-ago period. Production volume increased 5.6 percent. The pricing environment continued to be challenging, with net price retention totaling a negative 2.2 percent in the third quarter of 2002. Strong cost performance more than offset the pricing pressures.

Continuing the trend so far this year, GM's overall U.S. market share increased again in the third quarter of 2002, with this year's 28.0 percent share up 0.3 points versus the same quarter last year. Retail market share continued to show strong growth. Trucks accounted for about 57 percent of total sales in the third quarter, compared with 53 percent in the same period last year.

"The improved vehicle sales and increased share were the result of excellent consumer acceptance of our new cars and trucks, combined with a focus on being competitive in the marketplace," Wagoner said. "As we continue to leverage our global resources and bring out more new and exciting products, we plan to remain the market leader globally and in North America, and improve our position in other regions."

Major product enhancements introduced in the third quarter include the restyled Chevrolet Silverado and GMC Sierra, and updated versions of Chevrolet Cavaliers, Pontiac Sunfires, and Saturn L series. They follow the introduction earlier this year of extended versions of the popular Chevy TrailBlazer and GMC Envoy, along with the all-new HUMMER H2. Coming to market later this year and in 2003 are the Saturn ION sedan and coupe, all-new versions of the Saab 9-3 sedan and convertible, the Chevy SSR, the Pontiac Grand Prix, the Chevy Malibu, the Cadillac XLR luxury high-performance roadster, the Cadillac SRX crossover vehicle, the Buick Rainier sport utility vehicle, and the Opel Vectra Signum, Vectra Wagon, and the new Meriva monocab in Europe.

GM Europe (GME) reported a loss of $180 million in the third quarter of 2002, an improvement from the $287 million loss in the year-ago period. Compared with the same period last year, the significant progress in reducing material and structural costs more than offset a decline in vehicle sales and costs associated with the launch of the all-new Saab 9-3. GME continued to face weak market conditions, particularly in Germany, and a challenging pricing environment.

"GM Europe's turnaround remains a top priority. We've made very good progress on the cost side, and now the focus is on improving revenue growth," Wagoner said. "We expect that the strong products coming from Opel/Vauxhall and Saab will lead to improved sales."

GM Asia-Pacific reported a profit of $76 million in the third quarter of 2002 compared with earnings of $60 million a year ago, led by continued strong performance at Shanghai GM and GM's Australia-based Holden unit. GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $61 million in the third quarter of 2002 compared with a loss of $6 million a year ago. Results were negatively affected by unfavorable economic and market conditions in Brazil, Venezuela and Argentina. On the positive side, GM's market share in the region increased significantly to 18.2 percent in the third quarter of 2002, compared with 15.8 percent in the prior-year period.

GMAC
GMAC earned $476 million in the third quarter of 2002, an increase of nearly 9 percent from third-quarter earnings of $437 million a year ago. The increase was more than accounted for by improvements in mortgage operations, resulting from increased volumes and fees.

"GMAC's capital position has strengthened significantly," Wagoner said. "Based on estimated asset and earnings growth next year, GMAC's leverage should remain stable without any need for incremental capital from GM."

HUGHES
Hughes lost $81 million in the third quarter of 2002, an improvement compared with the loss of $142 million in the prior-year quarter, primarily because of stronger performance by DIRECTV U.S. Revenue totaled $2.2 billion in the third quarter of 2002, up from $2.1 billion in the same quarter last year, led by the growing subscriber base of DIRECTV. Total DIRECTV U.S. subscriptions increased approximately 206,000 from the second quarter of 2002 to 10.9 million.

Despite the unfavorable initial review by the Federal Communications Commission (FCC) GM, Hughes and EchoStar continue to work with the FCC and the U.S. Justice Department to resolve any concerns about the plan to split off Hughes and merge the company with EchoStar Communications Corp. GM believes this transaction is in the best interest of consumers, and all classes of shareholders, and will work aggressively to obtain approval.

LOOKING AHEAD
General Motors expects total U.S. industry vehicle sales for 2002 will be approximately 17 million units. North American production is forecast at about 1.4 million vehicles in the fourth quarter of 2002, and more than 5.6 million vehicles in calendar year 2002.

For the fourth quarter of 2002, GM estimates its earnings, excluding Hughes and any special items, will be about $1.50 per share, reflecting higher volume and solid results in North America and at GMAC, partially offset by continued losses in Europe and Latin America.

GM expects 2002 earnings will be about $6.75 per share, excluding special items and Hughes. Including Hughes, but excluding special items, GM expects to earn approximately $1.40 per share in the fourth quarter of 2002 and $6.35 per share for the calendar year.

For 2003, GM expects moderate economic growth and resulting U.S. industry sales in the mid-to-high-16 million-unit range.