GM Profit Soars as U.S. Results Hit 10-Year High
Despite persistent labor woes, General Motors said Monday that first-quarter earnings improved 76% over a year ago on the strength of its best domestic performance in a decade.
The company attributed the earnings improvement to strides in cutting manufacturing costs while introducing a slew of new car and truck models in the U.S. market.
“It’s clear that we are moving in the right direction,” said John F. Smith Jr., chairman and chief executive.
The company reported net profit of $1.796 billion, or $2.30 a share, compared with earnings of $1.019 billion, or 94 cents a share, a year ago, when earnings were depressed $900 million by a two-week strike. Revenue rose 7.7% to $42.26 billion from $39.24 billion.
The biggest improvement came in North America, where GM earned $764 million compared with a strike-induced loss of $279 million a year ago. It was the best financial result in North America since 1988.
“Slowly the company appears to be putting all the pieces together,” said David Andrea, an analyst for Roney & Co. in Detroit.
The results were better than most analysts expected. GM shares rose 62.5 cents to $53.625 on the New York Stock Exchange. But there is growing concern about the outlook for auto sales.
“Vehicle demand is not growing much and incentives are increasing,” said John Casesa, analyst with Wertheim Schroder & Co. “That environment puts pressure on profit margins.”
There is also worry about GM’s continued rocky relationship with its unions. A strike at two Ohio parts plants in March 1996 shut down most of the firm’s assembly operations for two weeks.
The company was hit with two local strikes in the first quarter--costing about $40 million in profit--and is now confronting a weeklong strike by the United Auto Workers at its Oklahoma City car assembly plant. Thirty local contracts are still not signed.
Despite having to offer richer sales incentives to customers, GM said its net profit margin--income as a percent of net sales--was 4.8% in the quarter, up from 2.3% a year ago. In North America, it was 3.1%, up from a loss of 1.3% last year.
Internationally, GM earned $317 million, down from $432 million. The reduction was largely a result of lower profit in the tough European market.
Delphi, GM’s auto parts unit, earned $180 million, up from $79 million a year ago. Hughes Electronics earnings fell 25% to $235 million, partially reflecting a year-ago gain on the sale of its DirecTV unit. And GMAC, the lending subsidiary, reported record earnings of $372 million, up 20%.
At a Glance:
Coca-Cola Co. said its first-quarter earnings rose 38% from a year ago as worldwide sales of its soft drinks increased faster than expected. The company also benefited from the recent sale of its stake in a British bottling venture for about $1 billion. Coca-Cola earned $987 million, or 40 cents per share, compared with $713 million, or 28 cents, in the same period last year. The results beat analysts’ expectations of 38 cents a share.
NationsBank and a number of big U.S. banks reported higher first-quarter profits, buoyed more by service charges and other fees than by lending. NationsBank said profit jumped 38% to $709 million, or 97 cents a share, from $513 million, or 85 cents, during the same period last year. . . . First Chicago’s rose 12% to $380 million, or $1.18 a share, from $340 million, or $1.04, for the same period last year. . . .
Minneapolis-based Norwest said net income rose to $321.9 million, or 84 cents a share, from $271.4 million, or 74 cents, in the first three months of 1996. . . . Bank of New York said net income rose to $265 million, or 65 cents a share, from $243 million, or 58 cents, in the same period last year.
Travelers Group said first-quarter earnings climbed 32% as profit grew in its insurance subsidiaries and Smith Barney Inc. brokerage. Profit excluding gains from investment sales rose to $633.2 million, or 95 cents a share, from the year-earlier $479.6 million, or 71 cents.
Raytheon fell slightly in the first quarter to $183.4 million, or 78 cents per share, versus $186.5 million, or 78 cents per share, a year earlier.
L.A. Gear Inc. of Santa Monica reported a first-quarter net loss $5.3 million, or 23 cents per share, compared with net income of $1.1 million, or 5 cents, a year ago.
Boise Cascade Corp. and Bowater Inc. had first-quarter losses as prices for paper and pulp dropped. Boise Cascade reported a loss of $15.2 million, or 51 cents a share, compared with net income of $25.5 million, or 32 cents, in the same quarter last year. Bowater posted a loss of $314,000, or 3 cents a share, compared with a year-earlier profit of $75.9 million, or $1.73.
Donaldson, Lufkin & Jenrette Inc. said its first-quarter earnings rose 33% to $86.4 million, or $1.35 cents a share, from $65.1 million, or $1.01 cents, a year earlier.
Tyco International Ltd. said its fiscal third-quarter earnings rose 34% to a record $106.7 million, or 67 cents a share, from $79.5 million, or 52 cents, in the year-earlier period.
Goodyear Tire & Rubber Co. said first-quarter earnings rose 12% to $170.4 million, or $1.09 a share, from $151.8 million, or 98 cents, in the year-earlier quarter.
