GM’s Non-Auto Profit Hit $2.5 Billion in ’91 : Subsidiaries: Earnings at EDS, GMAC and GM Hughes Electronics helped offset vehicle losses.
While General Motors gushed red ink last year, three subsidiaries that make no cars were profitable.
Electronic Data Services, General Motors Acceptance Corp. and GM Hughes Electronics reported combined profit of nearly $2.5 billion. In contrast, GM’s North American automotive operations suffered an estimated $7.4-billion loss. The company as a whole lost $4.5 billion in 1991, GM officials said Monday.
The three subsidiaries, giant corporations in their own right, operate with great independence. But their financial fortunes are closely linked to GM’s auto business.
GM is the largest customer of EDS, the Dallas-based computer services firm founded by Texas businessman H. Ross Perot. Nearly half of EDS’ $7.1 billion in revenue last year came from the data processing and computer software services provided to GM.
But EDS, whose 1991 profit rose 10.2% from 1990 levels, to $547.5 million, has seen faster growth in its non-GM business. Revenue from the auto maker has remained flat, industry analysts said, while EDS’ non-GM business has grown between 20% and 25% annually.
The relationship with GM “does not do much for EDS’ growth,” said analyst P. Martin Ressinger at Duff & Phelps in Chicago. But, he said, “as an investment for GM, EDS has done well.”
Sales of GM cars play a larger role at General Motors Acceptance Corp., the auto maker’s financing arm.
Last year, GMAC’s net income rose slightly to $1.4 billion, excluding a change in accounting rules and a one-time, $171-million charge to provide a cushion against dealer loan losses.
GMAC financed four out of every 10 GM cars sold in 1990. But most of the unit’s earnings growth last year came from improved performances in its insurance and mortgage banking businesses.
The auto and aerospace businesses are the two major influences on GM Hughes Electronics.
The subsidiary is made up of defense contractor Hughes Aircraft, which GM purchased in 1985, and Delco Electronics, which primarily makes electronic components and auto stereos for GM cars.
Profit at the subsidiary fell to $559.4 million in 1991 from $726 million the previous year. The dip was blamed mostly on lower GM production in North America--eating into Delco’s profit--and the decline in Hughes’ flight simulator business.
Despite lower earnings for the year, the unit finished 1991 with a record 31% increase in fourth-quarter profit. That came as GM increased its auto production.
“Even a small change on GM’s production can have a magnified impact on Delco’s bottom line,” said Lawrence M. Harris, an analyst at Kemper Securities.
GM Plant Closings General Motors Corp. announced Monday that it will close 11 plants, including assembly plants in Willow Run, Mich., and North Tarrytown, N.Y. In addition, production will be reduced at the St. Catharine’s, Ontario, engine plant. The announced shutdowns will affect more than 16,000 workers. Source: General Motors Corp.
