Wednesday, June 4, 2003

GM improving in a difficult year, chairman says

The Associated Press

WILMINGTON, Del. - General Motors Corp. continues to improve its quality and product lineup, but the world's largest automaker is disappointed in its sales and market share results so far this year, chairman and chief executive Rick Wagoner told shareholders Tuesday.

GM saw its U.S. vehicle sales fall 9 percent through April despite record levels of rebates and financing deals. Its market share, excluding the Saab brand, was 26.5 percent through April, down from 28.4 percent to end 2002.

Later Tuesday, GM said its U.S. car and truck sales for May were up 4 percent from the same period a year ago.

The U.S.-led war with Iraq and lagging consumer confidence have curtailed sales industrywide since the first of the year.

"In North America, continuing slow economic growth has weakened automotive demand," Wagoner told the 128 shareholders at its 95th annual shareholders meeting at the Hotel duPont. "But we think the underlying fundamentals for the U.S. economy are excellent, and the recent trends in exchange rates are positive."

Wagoner, leading his first shareholder meeting, replaced Jack Smith as chairman May 1. Smith retired after 42 years with the Detroit-based company.

Despite recent obstacles, Wagoner said, GM is coming off a strong year in which its U.S. market share rose for a second consecutive year, the first time it achieved such a feat in more than a quarter-century. The company's profits tripled in 2002 to $1.7 billion from $601 million in 2001.

Wagoner said GM Europe's turnaround plan is on track despite a generally weak economy. He cited an ongoing product offensive at Opel, Vauxhall and Saab. He said the company also was thriving in China, now the world's third-largest automotive market.

"Overall, the outlook in Asia-Pacific is very positive," he said.

So-called legacy costs - pension and health care obligations - continue to hamper the company. As such, Wagoner said, GM has increased its focus on generating cash, one motive behind the pending sale of its Hughes Electronics Corp. subsidiary.

In April, Rupert Murdoch's News Corp. agreed to acquire control of Hughes, DirecTV's parent, in a $6.6 billion cash and stock deal. News Corp. agreed to buy GM's interest in Hughes and enough other shares to give Murdoch control of 34 percent of Hughes stock.

The deal is expected to close by the end of the year or early in 2004.

Among Detroit's Big Three automakers, GM fared best in the recent J.D. Power 2003 initial quality survey. The company has said the result was particularly impressive considering it launched 21 vehicles in the past year - 44 percent of its production volume.

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