General Motors told analysts Thursday that 2002 profits would beat expectations by a considerable margin, with only the European operation reaching for the red ink despite an anticipated slowdown across the industry.
Omitting losses from its satellite TV subsidiary Hughes Electronics (which it wants to sell to EchoStar), GM is aiming for $3 per share profit this year, thanks to reductions in costs and labour. This compares favourably with analysts’ expectations of $1.93 (albeit including the Hughes losses).
GM plans to slash material costs in America by 4% in the coming year, following a 2.5% decrease last year, while its salaried and contract staff will be cut by 10% in the US and Europe. Natural wastage, moreover, will reduce the group’s American hourly workforce by 5%.
The world’s largest auto maker added that, due to extra production volumes, underlying earnings per share for Q4 2001 would come to about 70 cents, ahead of October’s forecasts of 50 cents. However, the economic crisis in Argentina, which has prompted a currency devaluation, will pull the final fourth-quarter figure down to around 60 cents.
Speaking of the proposed sale of Hughes to EchoStar, GM admitted the deal was under intense scrutiny by Washington regulators, but chief financial officer John Devine said the car giant was “confident it is going to get done”, though maybe not until October or November.
GM’s optimism about the coming year stands in contrast with the mood at Ford Motor Company, which is expected to announce a major overhaul of its operations on Friday.
News source: Financial Times