DETROIT – General Motors Corp.'s (GM) third-quarter earnings rose a slimmer than expected 3.5 percent as the company's automotive business lost $130 million primarily because of heavy losses in Europe and lower production and intense pricing pressure in North America.
The world's largest automaker also lowered its earnings forecast for the entire year on Thursday only hours after announcing it plans to cut 12,000 jobs in Europe, or roughly 20 percent of its work force there, by the end of 2006 in hopes of saving $617 million a year.
GM said it earned $440 million, or 78 cents a share, in the July-September period, far below the Wall Street consensus of 96 cents a share compiled by Thomson First Call. The results compare to $425 million, or 79 cents a share, in the year-ago period.
Revenue rose 3 percent in the quarter to $44.9 billion from $43.5 billion a year ago.
The company said 90 percent of the job cuts in Europe would be made in 2005. It said the overhaul of its money-losing Opel, Saab and Vauxhall operations was necessary because of sluggish demand, growing challenges from European and Asian brands and price competition.
"Competition in the automotive business around the globe remains intense, and we're seeing negative pricing in most major markets," GM chairman and chief executive Rick Wagoner (search) said in a statement. "Our automotive earnings in the third quarter reflect these challenging market conditions and were frankly disappointing."
But GM also said its market share grew in all four global regions, and that its GMAC (search) finance arm posted a ninth consecutive quarter of improved earnings.
GMAC, which has contributed heavily to profits in recent quarters, earned $656 million, up from $630 million in the year-ago quarter.
The last time GM's automotive earnings outpaced those at GMAC was in the fourth quarter of 2002.
The $130 million loss for GM's global automotive operations compared with a $34 million profit a year ago. GM said positive results in the Latin America/Africa/Middle East region were more than offset by losses in North America and Europe and lower profits in the Asia Pacific region.
Still, GM's global market share rose to 15.5 percent from 15.1 percent a year ago.
In North America, GM reported a loss of $22 million, compared with earnings of $128 million in the year-ago period. The company was hurt by lower production to offset bloated inventories and a continuation of heavy consumer incentives to spur demand.
Also, the company said, health care costs in the United States continue to grow at an excessive rate. After spending $4.8 billion on health care in 2003, GM has said it expects those expenses to rise 8 percent this year.
GM Europe's loss widened to $236 million from $152 million in the third quarter of 2003.
Even though it has increased its European market share slightly this year, GM has had persistent losses amid sluggish consumer demand — a factor that has plagued other automakers too.
GM Asia Pacific earned $101 million in the quarter, compared with earnings of $162 million a year ago, also reflecting lower pricing and a trend toward sales of less-expensive vehicles because of an economic slowdown in China.
Because of heavier-than-expected losses in Europe and the Asian slowdown, GM revised its 2004 earnings guidance to between $6 and $6.50 a share, down from its midyear guidance of $7 a share.
For the first nine months of the year, GM earned $3.06 billion, or $5.39 a share, up from $2.81 billion, or $5.08 a share, a year ago. Revenue rose to nearly $142 billion from $136 billion a year ago.