For serious. Everyone's favorite lovable and huggable automaker that's the world's
biggest second-biggest sometimes-biggest just reported their first quarter numbers and it's kinda a big deal so far — mostly because it's a profit of $62 million over a revenue of $43.9 billion! For reals, at least according to the press release, which we've handily included after the jump. Oh and it's just preliminary so they've got like, whatever, a year to get it right later.
GM Reports Preliminary First Quarter Financial Results
* Reported net income $62 million
* Record first quarter global sales of 2.26 million units
* Improved automotive operations, reported net income of $272 million
* Adjusted automotive operating cash flow of $300 million
DETROIT - General Motors Corp. (NYSE: GM) today announced its financial results for the first quarter of 2007. The company posted record global sales, and improved automotive profitability and operating cash flow for the quarter.
"The first quarter of 2007 marked another quarter of continued progress in GM's global automotive operations. We were able to expand vehicle sales and improve automotive profitability based on the progress in our turnaround initiatives in North America and Europe and our expansion strategy for key growth markets like China, Russia and South America," said GM Chairman and Chief Executive Officer, Rick Wagoner. "We continue to see progress on the automotive bottom line as we implement the strategies laid out two years ago."
GM reported net income of $62 million, or $0.11 per diluted share, including special items, in the first quarter of 2007, compared with net income of $602 million, or $1.06 per diluted share, in the year-ago quarter.
The decline in reported GM earnings is more than accounted for by losses in the residential mortgage business of GMAC Financial Services (GMAC), driven by continued weakness in the U.S. nonprime mortgage sector (following the 51 percent equity sale of GMAC in late 2006, GM is reporting its 49 percent ownership interest using the equity accounting method). In addition, last year's results included a one-time after tax gain of $395 million due to the sale of a portion of GM's equity ownership position in Suzuki Motors.
The reported results for the first quarter of 2007 include unfavorable special items totaling $32 million after tax, or $0.06 per diluted share, related largely to restructuring actions in Europe and Asia Pacific, offset in part by a favorable item related to workforce attrition costs for previously divested components plants. Details on the special items are included in the "Highlights" section of this news release.
Excluding special items, GM posted adjusted net income of $94 million, or $0.17 per diluted share in the first quarter of 2007, compared to adjusted net income of $350 million, or $0.62 per diluted share in the first quarter of 2006. Total revenue for the first quarter of 2007 was $43.9 billion, down from $52.4 billion, almost entirely due to GMAC revenue no longer being included in GM's consolidated results. Automotive revenue for the first quarter of 2007 was $42.9 billion, down slightly from $43.6 billion in the first quarter of 2006.
GM Automotive Operations
Net income from GM's global automotive operations totaled $304 million on an adjusted basis, in the first quarter of 2007 (reported net income of $272 million), compared to $40 million in the year-ago quarter (reported net income of $295 million).
GM sold an all-time first quarter record 2.26 million cars and trucks in the first quarter of 2007, up 3 percent, or 67,000 units, over the first quarter of 2006. Sales in the GM Asia Pacific (GMAP) region grew more than 20 percent; GM Latin America, Africa and Middle East (GMLAAM) grew 17 percent, and GM Europe (GME) grew 6 percent. GM's all-time sales record was achieved despite challenging market conditions in the U.S. largely due to volatile fuel prices and contraction in the housing market.
GM North America (GMNA) posted an adjusted loss of $85 million in the first quarter of 2007 (reported net loss of $46 million), an improvement of $166 million compared to an adjusted net loss of $251 million in the year-ago quarter (reported net loss of $292 million).
The GMNA improvement in the first quarter was mostly attributable to large structural cost savings in health care and manufacturing related expenses. GMNA also enjoyed positive product mix related to the strong acceptance of new launch products as well as GM's continued strategy to reduce its daily-rental fleet business.
GMNA was able to improve its year-over-year net income, despite a significant production reduction of 192,000 units. The volume decline reflected the disciplined implementation of the company's sales and marketing strategy, including reducing dealer inventories in the U.S. and Canada by 111,000 units as compared to year-ago levels, and reducing deliveries to daily rental companies in the U.S. and Canada by 69,000 units. Retail sales were up slightly in the U.S. for the quarter, despite challenging market conditions.
"This quarter's results again demonstrate progress in the implementation of our North America turnaround plan. They reflect major cost reductions once again, which more than offset lower volume - a function of the disciplined implementation of our product-based sales and marketing strategy," Wagoner said. "And, our newest products such as the GMC Acadia and Chevrolet Silverado have been well accepted by consumers, which gives us confidence that the most important element of our North America turnaround - product excellence - is well on track."
GME adjusted net earnings for the first quarter of 2007 amounted to $42 million (reported net income of $5 million), compared with $131 million in the first quarter of 2006 (reported net income of $59 million). The decline in net income is attributable to unfavorable product mix, material cost and lower gains on commodity hedging, which was partially offset by improved structural cost and favorable pricing.
GME set a first quarter sales record, with almost 554,000 deliveries. This marks the highest quarterly retail sales ever for the region, and the best market share performance in 10 years at 9.8 percent. And in the growing market of Russia, GM sales increased by 128 percent, outpacing the 26 percent growth in that market.
"GM Europe's record sales for the quarter reflect strong acceptance of our newest Opel/Vauxhall cars, continued progress with our multi-brand strategy - including an all-time Chevrolet Europe sales record - and strength in the key growth markets of Europe, especially Russia," Wagoner said.
GMAP posted adjusted net income of $150 million in the first quarter of 2007 (reported net income of $116 million), up from $97 million a year ago (reported net income of $492 million). Despite the loss of income from the equity sale of Suzuki, the improvement reflects an approximate 20 percent sales volume increase led by China, India and South Korea, record exports of GM-DAT products and improved performance at Holden.
GMAP revenue was up almost 35 percent, at $4.6 billion, compared with the year-ago quarter. GMAP also set all-time records in sales and market share growth, outpacing overall industry growth. Building on the strength of the well-established Buick brand, new products such as the Cadillac SLS and Chevrolet Epica are also being well received in key markets like China.
"Our strongest growth is in the Asia Pacific market, which is critically important as this will be the fastest growing region in the world over the next decade," Wagoner said. "We continue to build on our already strong footprint in China, take advantage of GM-DAT's great capabilities, and move aggressively in other important markets, like India."
Net income for GMLAAM tripled to set a new first quarter earnings record of $201 million in the first quarter of 2007, up from $67 million in the year ago period (reported net income of $40 million). The improvement in profitability was driven by very strong volume, as well as better pricing and product mix.
The sales growth in the LAAM region is consistent across all major markets, with significant gains in key Latin American countries as well as strong performance in the Middle East and South Africa. Revenue was up 13 percent over the same quarter last year, setting a new first quarter record for GMLAAM.
"GMLAAM had an extremely strong quarter, setting records in both sales and profitability, on the strength of our traditionally strong representation in this growing region. The outlook is bright for continued strong results at GMLAAM for the rest of the year, and beyond," Wagoner said.
GMAC posted a net loss of $305 million in the first quarter of 2007, compared to net income of $495 million in the year-ago period. For the first quarter, GM recognized a net loss of $115 million associated with its 49 percent ownership of GMAC, including the accrual of dividends on GMAC preferred membership interests and certain tax benefits realized.
GMAC results were significantly impacted by a net loss of $910 million at Residential Capital, LLC (ResCap) due to continued pressures in the U.S. mortgage market. GMAC's first quarter net income generated by auto finance, insurance and other operations was $605 million, more than double the earnings generated by these same operations in the first quarter of 2006.
GMAC indicated its long-term prospects continue to look favorable based on strong business fundamentals across its automotive finance and insurance operations. In addition, GMAC indicated it anticipates a considerable improvement in ResCap's earnings performance in the second quarter this year, with losses in the U.S. residential mortgage sector expected to be at a much reduced level.
Cash and Liquidity
GM generated adjusted automotive operating cash flow of $300 million for the first quarter of 2007, an improvement of $1.5 billion year-on-year, with all four regions reporting improvement.
Cash, marketable securities, and readily-available assets of the Voluntary Employees' Beneficiary Association (VEBA) trust totaled $24.7 billion at March 31, 2007, up from $21.6 billion on March 31, 2006, but down from the year-end 2006 total of $26.4 billion.
Results for the first quarter of 2007 are preliminary and may be revised prior to the filing of GM's first quarter report on Form 10-Q in early May.
General Motors Corp. (NYSE: GM), the world's largest automaker, has been the annual global industry sales leader for 76 years. Founded in 1908, GM today employs about 280,000 people around the world. With global headquarters in Detroit, GM manufactures its cars and trucks in 33 countries. In 2006, nearly 9.1 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn and Vauxhall. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.
In this press release and in related comments by General Motors' management, we will use words like "expect," "anticipate," "estimate," "forecast," "initiative," "objective," "plan," "goal," "project," "outlook," "priorities," "target," "intend," "evaluate," "pursue," "seek," "may," "would," "could," "should," "believe," "potential," "continue," "designed," or "impact" to identify forward-looking statements that represent our current judgments about possible future events. We believe these judgments are reasonable, but GM's actual results may differ materially due to a variety of important factors. Among other items, such factors include: the ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring and health care cost reductions and to implement capital expenditures at levels and times planned by management; the pace of product introductions; market acceptance of the Corporation's new products; significant changes in the competitive environment and the effect of competition in the Corporation's markets, including on the Corporation's pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; costs and risks associated with litigation; the final results of investigations and inquiries by the SEC and other governmental agencies; changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, including the range of estimates for the Delphi pension benefit guarantees, which could result in an impact on earnings; changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees and the successful completion of a collective bargaining agreement; negotiations and bankruptcy court actions with respect to Delphi's obligations to GM, negotiations with respect to GM's obligations under the pension benefit guarantees to Delphi employees, and GM's ability to recover any indemnity claims against Delphi; labor strikes or work stoppages at GM or its key suppliers such as Delphi or financial difficulties at GM's key suppliers such as Delphi; additional credit rating downgrades and the effects thereof; factors affecting GMAC's results of operations and financial condition such as credit ratings, interest rates, the housing market(including the downturn in residential mortgages, particularly in the nonprime sector), adequate access to the capital, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate, and changes in GMAC's contractual servicing rights; shortages of and price increases for fuel; changes in economic conditions, commodity prices, such as steel and other raw materials, currency exchange rates or political stability in the markets in which we operate; the effects of transactions or alliances entered into by one or more of our competitors; currency exchange rates or political instability in the markets in which we operate; and general economic conditions, in particular stability of consumer confidence. The most recent annual reports on Form 10-K and quarterly reports on Form 10-Q filed by GM and GMAC provide information about these factors, which may be revised or supplemented in future reports to the SEC on those forms.
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