Record profits from mortgages and joint ventures in China helped General Motors beat its profit target last year despite its car business underperforming in the US, Europe and South America. The world's largest carmaker said this year was likely to be stronger than expected, and tried to reassure investors that profits from both home loans and China were sustainable. John Devine, chief financial officer, said the North American operations missed financial goals mainly because of Dollars 1.8bn of extra pension and healthcare costs.
The European business, which failed to limit its losses to Dollars 200m as planned, took a Dollars 300m currency hit from the rising euro and Swedish kronor, which hurts exports of Saabs. GM reported 2003 earnings of Dollars 3.2bn, Dollars 5.62 per share, before the results of its former Hughes Electronics subsidiary and one-off items. This was well ahead of the goal of Dollars 5 per share. It also set out a higher than expected forecast for profits in the first quarter of this year, of Dollars 1.75 a share, and said it expected to gain market share in every region of the world.
Mr Devine said the company would make it a priority to deal with the yawning gap between healthcare promises to pensioners of more than Dollars 60bn and the Dollars 12bn set aside to pay them. With healthcare inflation predicted to rise to 8.5 per cent this year, its costs for retirees' healthcare will hit Dollars 4.6bn, up from Dollars 4.3bn last year, he said. GM's mortgage division provided the biggest increase in earnings last year, and its Dollars 1.25bn net income was higher than total profits from carmaking.
Profit margins in China - the widest in the world - were holding up "pretty well" as cost-cutting and sales of more expensive vehicles balanced the effect of price cuts. Growth in the company's joint ventures in China was the main driver of a tripling of profits from Asia-Pacific to Dollars 577m in 2003.
The European business, which failed to limit its losses to Dollars 200m as planned, took a Dollars 300m currency hit from the rising euro and Swedish kronor, which hurts exports of Saabs. GM reported 2003 earnings of Dollars 3.2bn, Dollars 5.62 per share, before the results of its former Hughes Electronics subsidiary and one-off items. This was well ahead of the goal of Dollars 5 per share. It also set out a higher than expected forecast for profits in the first quarter of this year, of Dollars 1.75 a share, and said it expected to gain market share in every region of the world.
Mr Devine said the company would make it a priority to deal with the yawning gap between healthcare promises to pensioners of more than Dollars 60bn and the Dollars 12bn set aside to pay them. With healthcare inflation predicted to rise to 8.5 per cent this year, its costs for retirees' healthcare will hit Dollars 4.6bn, up from Dollars 4.3bn last year, he said. GM's mortgage division provided the biggest increase in earnings last year, and its Dollars 1.25bn net income was higher than total profits from carmaking.
Profit margins in China - the widest in the world - were holding up "pretty well" as cost-cutting and sales of more expensive vehicles balanced the effect of price cuts. Growth in the company's joint ventures in China was the main driver of a tripling of profits from Asia-Pacific to Dollars 577m in 2003.
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