Poor Sales in Europe Hurt GM’s Earnings
Troubles in Europe dragged down earnings at General Motors Corp. by 5.5% in the third quarter, and the world’s largest auto maker warned that its European business would not improve by the end of the year.
The news from the rest of GM’s empire was mixed, with the North American auto business still chugging out profit, but facing a heavier burden of incentives to keep customers interested.
“It was a pretty weak quarter, with very poor results in Europe,” said analyst David Bradley with J.P. Morgan & Co.
GM said Thursday it earned $829 million in the three months ending Sept. 30, compared with $877 million in the same period a year ago. Earnings per share were up, from $1.33 to $1.55, as GM continued buying back shares.
Results met Wall Street estimates. GM’s stock was down $1.25 to close at $57.38 on the New York Stock Exchange.
Sales edged down to $42.6 billion from $42.8 billion.
The company said it lost $181 million in Europe in the quarter, compared with profit of $32 million a year ago. Among the reasons GM cited for the loss were a decline in sales in Germany and Britain, the launch of new versions of the Opel/Vauxhall Corsa, and continued tough competition that is keeping prices down.
GM said Thursday that it’s cutting prices on all models in Britain by up to 12%.
The company said profit in North America was up 8% because of cost reductions, even as incentives increased and production of some high-profit trucks declined.
While U.S. auto sales have been running strong, auto makers have had to increase incentives to keep customers coming into showrooms. Last week, GM announced a one-month incentive program offering no-interest loans with terms of up to five years on several models of cars and mid-size sport-utility vehicles in a bid to reduce inventories.
The auto maker said it had a 71-day supply of cars and a 105-day supply of trucks; the industry standard is 60 days.
GM’s Asia Pacific division reported a loss of $10 million, compared with a loss of $54 million in the same quarter a year ago. GM’s Latin America/Africa/Mid-East business earned $31 million, reversing a loss of $36 million a year ago.
At a Glance
Other earnings, excluding one-time gains or charges unless noted, include:
* Bausch & Lomb Inc., posting a slight rise in third-quarter earnings, warned about future results and said it would cut its work force by 4%, or 450 jobs. The maker of contact lenses and lens-care products said profit from continuing operations edged up 1% to $37.8 million, or 70 cents a share, as revenue declined 1% to $441 million. The company said increased research and development spending and continued deterioration in currency rates will cut fourth-quarter earnings by 8 cents to 10 cents a share and cut full-year earnings by 14 cents to 16 cents, missing analyst forecasts. The company had warned in August that profit through 2001 would be less than it expected because growth in demand for its contact lenses and lens-care products has slowed. Bausch & Lomb shares fell $1.56 to close at $37.50 on the NYSE.
* Biogen Inc. reported a 10% gain in third-quarter earnings to $68.4 million, or 44 cents a share, a penny better than forecasts, on a 12% rise in revenue to $233.76 million. Sales of its multiple sclerosis drug Avonex, which makes up 80% of the company’s revenue, rose 18%.
* Costco Wholesale Corp. said its fiscal fourth-quarter earnings rose 9% to $200.2 million, or 43 cents a share, meeting lowered forecasts, on a 20% rise in sales to $10.41 billion. The operator of warehouse stores had warned in May that fourth-quarter earnings will come in a penny or two short of expectations. Analysts subsequently cut their consensus earnings estimate for the quarter to 43 cents a share from 45 cents, according to First Call/Thomson Financial.
* Dow Jones & Co. said third-quarter profit rose 6.4% to $48.4 million, or 55 cents a share, matching estimates, on higher advertising sales at its flagship Wall Street Journal and revenue at its electronic-publishing units. Sales rose 6.7% to $529.4 million.
* Guidant Corp., a leading maker of products for treating heart disease, said third-quarter profit rose 16% to $122.8 million, or 40 cents a share, a penny better than forecasts, as sales rose 6% to $600.8 million.
* Maytag Corp. reported that third-quarter profit declined 27% to $59.5 million, or 74 cents a share, as expected, after it lost business from two major retailers and struggled with tight pricing in a slumping major appliance market. Sales fell slightly to $1.06 billion from $1.07 billion. Maytag had warned last month of lower earnings, prompting analysts to lower their estimates from 96 cents to 74 cents.
* Office Depot Inc. said third-quarter profit fell 41% to $42.3 million, or 14 cents a share, missing estimates by a penny, as the retailer cut prices on some products to compete with warehouse-club stores. The company said sluggish retail sales and higher costs in North America overshadowed growth in its business services and international operations. Sales rose 9% to $2.8 billion.
* New York Times Co. said third-quarter earnings were virtually flat at $63 million, or 37 cents a share, in line with forecasts, citing higher newsprint costs, an increased investment in New York Times Digital and tough comparisons to advertising sales a year earlier. Sales rose 7.9% to $787.3 million. The company also said it’s withdrawing plans to issue a tracking stock for its Internet unit, citing “unfavorable conditions” in the equities market.
* Visx Inc., maker of lasers used to correct vision, said third-quarter profit dropped 51% to $12 million, or 19 cents a share, as it cut fees it charges doctors amid increased competition. Sales plunged 43% to $45.7 million. The earnings were a penny higher than analysts expected.
