GM reports 2004 financial results

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19.1.2005
GM reports 2004 financial results

General Motors Corp. today reported adjusted 2004 earnings from continuing operations of $3.6 billion, or $6.40 per diluted share, led by record earnings from financial services and a 12-percent improvement in automotive earnings. These results, which were in line with GM's original guidance, compare to earnings of $3.2 billion, or $5.62 per share, in 2003. Adjusted revenue rose 4.5 percent to a record $193 billion.

Consolidated net income for 2004, including special items, totaled $3.7 billion, or $6.51 per share, compared with $3.8 billion, or $7.14 per share, in 2003.

"GM reported solid overall results in 2004, despite challenging competitive conditions in many markets around the globe," said GM Chairman and Chief Executive Officer Rick Wagoner. "For the tenth-consecutive year, General Motors Acceptance Corp. (GMAC) reported annual earnings growth, posting a record profit of $2.9 billion. And, our automotive operations recorded their second-highest vehicle-sales volume in history, with market-share gains in three out of four automotive regions last year.

"We believe strongly that the auto business is a growth business and we intend to fully participate in that growth with a steady cadence of new, best-in-segment cars and trucks in all major markets around the globe," Wagoner said.

Fourth Quarter
GM's adjusted earnings from continuing operations totaled $569 million, or $1.01 per share in the fourth quarter of 2004, down from $838 million, or $1.47 per share in the fourth quarter of 2003. Including special items and discontinued operations, GM reported net income of $630 million, or $1.11 per share in the fourth quarter of 2004, down from $1.0 billion, or $2.13 per share in the year- ago period. Adjusted revenue rose 4.7 percent to $51.2 billion.

The results for the fourth quarter of 2004 include special items with a net favorable effect of $61 million, or $0.10 per share (see "Highlights"). The results for the fourth quarter of 2003 include net-favorable special items totaling $339 million, or $0.72 per share.

GM financial results described throughout the remainder of this release exclude special items unless otherwise noted (see "Highlights").

GMAC
GMAC earned a record $2.9 billion in 2004, up from $2.8 billion in 2003. In the fourth quarter of 2004, GMAC earned $611 million, down slightly from record earnings of $630 million in the fourth quarter of 2003.

"GMAC has done a terrific job transforming itself from an auto-finance unit into a broad-based financial-services company that is focused on producing sustainable, long-term earnings," Wagoner said. "In addition, GMAC has diversified its sources of funding to strengthen its balance sheet in the face of a higher-interest-rate environment. Going forward, we expect GMAC to continue to be a significant source of income for GM, and an important partner in our drive to grow sales volumes around the world."

GMAC's financing operations reported net income of $1.5 billion in calendar-year 2004, up from $1.4 billion in 2003. The increase reflects considerable improvement in earnings from international operations, lower credit-loss provisions, improved proceeds from the sale of off-lease vehicles in North America, and the impact of favorable tax settlements, partially offset by lower net-interest margins.

Mortgage operations earned $1.1 billion in 2004, a decline from record net income of $1.3 billion in 2003 as residential-mortgage industry volumes declined by approximately 30 percent. Despite the lower industry volumes, GMAC’s mortgage operations experienced market-share gains, asset growth, improved mortgage-servicing results and an increase in fee-based revenue.

GMAC's insurance operations generated record net income of $329 million in 2004, up from $179 million in 2003. The increase reflects a combination of strong results achieved through increased premium revenue, favorable loss experience, and improved investment-portfolio performance.

GM Automotive Operations
GM's automotive operations earned $1.2 billion in 2004, up from $1.1 billion in 2003. Worldwide production totaled 9.1 million units in 2004, up from 8.8 million in 2003. GM’s global automotive business reported earnings of $235 million in the fourth quarter of 2004, down from $396 million in the year-ago quarter. The latest fourth-quarter results reflect a significant improvement at GM’s Latin America/Africa/Mid-East (GMLAAM) region and improved earnings at GM North America (GMNA), offset by losses at GM Europe (GME) and reduced earnings at GM Asia Pacific (GMAP).

GM reported market-share gains in three out of four automotive regions in 2004. GM ended 2004 with a global market share of 14.5 percent, down slightly from 14.6 percent in 2003.

GMNA earned $1.2 billion in 2004, in line with 2003 results. GM’s market share in North America declined to 26.7 percent in 2004 from 27.4 percent in 2003. GMNA earned $416 million in the fourth quarter of 2004, up from $397 million in the fourth quarter of 2003, as continued cost reduction and favorable tax settlements were partially offset by lower production volumes and unfavorable product mix.

"While we fell short of our goal to gain market share in North America in 2004, we had a solid finish to the year," Wagoner said. "Sales volumes for our newest vehicles gained momentum throughout the year and we continued to make progress in the key areas of productivity, quality, and cost reduction."

Among the highlights for 2004:

GM set U.S. industry records in total truck and sport-utility-vehicle sales for the fourth-consecutive year and once again sold more full-size pickups than any other manufacturer.
Chevrolet sold more passenger cars in the United States than any other brand and had its best sales year since 1988.
Cadillac's U.S. sales rose 8.4 percent in 2004, marking its best annual sales performance since 1990.
GMC sold a record 602,064 vehicles in 2004, the eleventh time in a dozen years that GMC has established a new sales record.

"We're encouraged by the success of Cadillac, Chevrolet and GMC, and we're determined to build on that success with our other brands," Wagoner said. "In 2005, our product portfolio includes a number of new high-volume vehicles that are continuing to ramp, such as the Pontiac G6, the Chevrolet Cobalt, the Buick LaCrosse and the Cadillac STS. In addition, we are also introducing later this year the Pontiac Solstice, the Hummer H3, the Chevrolet HHR and the Cadillac DTS, among others."

GME posted a loss of $742 million in 2004, compared with a loss of $286 million in 2003. In the fourth quarter of 2004, GME reported a loss of $345 million, compared with a loss of $66 million in the year-ago quarter.

"GM Europe reached an important milestone in December when we agreed with our European labor unions on the framework for a restructuring plan that will help GME reduce its cost footprint," Wagoner said. "But, we're also focused on improving revenue. In 2004, GME increased its market share to 9.5 percent, its highest level in five years. We plan to build on that success with the introduction of the Opel Astra 3-door next month, followed by the Saab 9-3 sport hatch, and the Opel Zafira later this year. The expansion of the Chevrolet brand in Europe is well underway and already contributing to market share gains."

GMAP reported record net income of $729 million in 2004, up from $577 million in 2003. The region's market share rose to 5.2 percent in 2004, up from 4.9 percent in 2003. GMAP earned $117 million in the fourth quarter of 2004, compared with earnings of $177 million in the year-ago quarter.

"GM's Asia Pacific operations again delivered solid results in a more-challenging environment," Wagoner said. "While sales in China slowed in the second half of the year, after the government took actions to slow rapid growth, GM China sold almost half a million vehicles in 2004, a gain of 27 percent. We're also pleased with the improved results in Thailand and India, and the steady progress we're making at GM Daewoo Auto & Technology Co. (GM-Daewoo).

"GM-Daewoo continues to be a global force," Wagoner said. "Besides giving us a major presence in the Korean market, and a strong addition to our global product-development capability, GM Daewoo is helping us grow our market position all around the world. In 2005, GM-Daewoo is expected to produce more than one million vehicles."

GMLAAM earned $85 million in 2004, a significant improvement from the year-ago loss of $331 million. GMLAAM's market share rose to 17.4 percent in 2004 from 16.3 percent in 2003. GMLAAM earned $47 million in the fourth quarter of 2004, compared with a year-ago loss of $112 million.

"GMLAAM returned to profitability in 2004, reflecting a lot of hard work on the cost side of the business and some very successful product introductions," Wagoner said. "We're particularly pleased with our performance in Brazil, where GM became the leading automaker for the first time in its 79-year history of operations there. Volume was also strong in the Mid-East region, where we sold nearly 100,000 units in 2004, an increase of 60 percent from 2003."

Cash and Liquidity
Cash, marketable securities, and short-term assets of the Voluntary Employees’ Beneficiary Association (VEBA) Trust totaled $23.3 billion at Dec. 31, 2004, excluding financing and insurance operations, down from $24.5 billion on Sept. 30, 2004. During the fourth quarter of 2004, GM pre-funded its retiree-health-care obligation by an additional $4 billion, bringing the year-end funding balance for retiree-health-care obligations to approximately $20 billion. Automotive operating cash flow for the year ended Dec. 31, 2004 totaled $4.2 billion.

GM's U.S. hourly and salaried pension plans were $3 billion over-funded at the end of 2004, a significant improvement from the previous year when the plans were $300 million over-funded. Asset returns of approximately 14 percent more than offset a decline in the discount rate to 5.75 percent at the end of 2004 from 6.00 percent at the end of 2003.

Profit Sharing
Approximately 119,000 hourly employees in the United States will receive a profit-sharing payment in 2005. A typical U.S. hourly employee, eligible under the profit-sharing program, would qualify for a payment of approximately $195.

Looking Ahead
GM expects solid, worldwide economic growth in 2005 with global industry sales surpassing 62 million units. GM expects North American industry sales of approximately 20 million units, about flat with 2004 results. Industry sales in Europe are expected to total approximately 20 million units, on par with 2004, while industry sales in the Asia-Pacific region are expected to rise to approximately 17.7 million units. Industry sales in the GMLAAM region are expected to increase to approximately 4.4 million units in 2005.

GM expects 2005 earnings to be approximately $4.00 to $5.00 per share, excluding any special items and at current dilution levels. GM expects to increase global sales volumes, generate $2 billion in operating cash flow and increase capital expenditures to approximately $8 billion in 2005. GM estimates break-even or better results in the first quarter of 2005, excluding any special items, reflecting lower production volumes and less-favorable product mix.