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Sat, Jul 19, 2003 - Page 12 News List

GM reports profit decline of 31%

NY TIMES NEWS SERVICE , DETROIT

General Motors reported a 31 percent decline in second-quarter net profit on Thursday, in large part because of falling vehicle sales in North America coupled with a price war that continues to escalate.

GM's results were also hurt by US$168 million in costs from a May tornado that shut down the company's Oklahoma City assembly plant for nearly two months. The plant makes midsize sport utility vehicles like the Chevrolet Trailblazer.

But the company was upbeat about the outlook for the second half of the year, in contrast to a gloomier picture offered by the Ford Motor Co, which reported lower earnings on Wednesday.

"We're looking at the market over the last 60 to 90 days and feeling better," John Devine, GM's chief financial officer, said on a conference call. He added that the company expected the economy to recover in the second half of the year and increase industry sales.

"We're not feeling wonderful, but it's an improvement from what we saw in the first quarter," he said.

In the quarter, GM reported net income of US$901 million, or US$1.58 a share, compared with US$1.3 billion, or US$2.43 a share, in the period a year earlier. Revenue was flat at US$48.3 billion.

The results handily beat Wall Street's estimates of US$1.19 a share, according to Thomson First Call. But analysts expressed concern about the company's diminishing profits in the crucial North American market.

The report came as contract talks opened between GM and the UAW here. Big Three labor talks are being closely watched because crucial foreign competitors like Toyota and Honda have much lower labor costs.

On GM's earnings outlook, Devine said the company now expected a profit of US$4.50 to US$5 a share for the full year after earning US$3.39 a share in the first half. Earlier in the year, the company had backed away from a goal of earning US$5 a share, but Devine said on Thursday that the goal was in reach.

Shares of GM fell US$0.18, or 0.5 percent, to US$35.74.

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