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Fri, Jul 23, 2004 - Page 12 News List

China helps boost GM's Q2


General Motors Corp reported robust second-quarter results on Wednesday chiefly due to the strength of the Chinese auto market and its financial services division.

The world's biggest automobile maker said that earnings came in slightly ahead of expectation, but stuck with its previous, conservative full-year earnings guidance.

The results reflect the tough sales environment in the global vehicle market.

On Monday, the Ford Motor Co reported that strong second-quarter earnings of US$1.17 billion, but only because record earnings at its financing arm offset money-losing automotive operations.

For the quarter ended June 30, the automaker raked in US$1.34 billion in net profit, up almost 50 percent from the same period a year ago on sales that were ahead just seven percent.

Earnings per share climbed to US$2.36 from US$1.58 a year before, slightly ahead of the US$2.24 consensus expectation of industry analysts polled by First Call.

"Overall, our financial results for the quarter were reasonably good," said GM chairman and chief executive Rick Wagoner.

But while financing arm General Motors Acceptance Corp (GMAC) did well, many areas of the automotive business were disappointing, he said.

"General Motors Acceptance Corp. once again had an outstanding quarter, setting another record," Wagoner said in a statement.

"But competition in the global automotive market remains very intense, and we still have much work to do to improve our automotive profitability to targeted levels," he said.

GMAC, boosted by gains in its insurance business, earned a record US$860 million in the latest quarter, up 3.1 percent from a year earlier. The results from GM's core automotive operations were mixed, with gains in Asia Pacific offsetting mediocre results in North America and Europe.

Asia Pacific accounted for almost half of the group's US$529 million in net income and 18 percent of GM's total net income. On a year-over-year basis, the division's net income also grew 45 percent.

On a related note, GM chief financial officer John Devine said the company continues to be bullish on China in spite of a recent cooling in the sales pace there.

"I expect volume growth to continue, but there will be some margin pressure," he told reporters in a conference call.

GM North America grew its earnings to US$328 million in the second quarter of this year, compared with earnings of US$83 million a year ago, but most of that came from material cost savings.

The automaker has also given up one point of its hard-earned US market share since this time last year, slipping to 26.2 percent, GM executives acknowledged.

"While earnings at GM North America improved, overall sales, market share and financial results were well below our expectations. For sure, the competition is tough, but we also must move faster to implement our strategy," Wagoner said.

Europe continued to be a drag on earnings, losing US$45 million.

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