For Release 8:00 a.m. EDT, Tuesday, January 20, 2004
GM Earns $3.8 Billion, or $7.14 Per Share in 2003
Fourth Quarter Earnings $1.0 Billion, or $2.13 Per Share
GMAC Posts Ninth Straight Year of Earnings Growth
GM Generated More Than $32 Billion in Cash in 2003
GM's adjusted income, which excludes special items and results from Hughes Electronics, totaled $3.2 billion, or $5.62 per share, in 2003, compared with $3.9 billion, or $6.98 per share in 2002.
FOURTH QUARTER 2003
In the fourth quarter of 2003, General Motors reported consolidated net income of $1.0 billion, or $2.13 per share, compared with $1.0 billion, or $1.71 per share, in the fourth quarter of 2002. Revenue rose 7.7 percent to $49.1 billion from $45.6 billion in the fourth quarter of 2002.
Excluding special items and Hughes, GM earned $838 million, or $1.47 per
share, in the fourth quarter of 2003, compared with $934 million, or $1.67 per
share, in the year ago period.
GM's 2003 results reflect increased dilution primarily attributable to the status of employee stock options, which reduced earnings per share by approximately $0.03 in the fourth quarter of 2003 and $0.08 in calendar year 2003. GM's 2003 results also include preliminary earnings from Hughes Electronics (NYSE: HS). Hughes, now an independent, publicly traded company, will report financial results at a later date. GM split off Hughes Electronics and retired the GM Class H common stock on Dec. 22, 2003.
GM financial results described throughout the remainder of this release exclude special items unless otherwise noted (see "Highlights").
YEAR IN REVIEW
"GM reported solid overall results in 2003, reflecting strong contributions from GMAC and our Asia Pacific automotive operations," GM Chairman and Chief Executive Officer Rick Wagoner said. "By leveraging our strengths as a global manufacturer with strong brands and great cars and trucks, we expect to improve our automotive profitability, increase revenue and build market share in 2004."
GM generated more than $32 billion in cash in 2003, about three times the company's original target, including more than $10 billion in cash from automotive operations, as well as proceeds from non-core asset sales and global debt offerings.
GM's strong cash performance enabled the company to contribute a total of
$18.5 billion to its U.S. pension plans and $3.3 billion to the Voluntary
Employees' Beneficiary Associated (VEBA) Trust for retiree health-care benefits
in 2003. As previously disclosed, GM contributed an additional $2.4 billion to
the VEBA Trust in January 2004.
Cash, marketable securities, and assets of the VEBA trust invested in short-term fixed-income securities totaled $26.9 billion at Dec. 31, 2003, excluding GMAC and Hughes, compared with $17.3 billion the end of 2002.
GM AUTOMOTIVE OPERATIONS
GM's global automotive operations earned $396 million in the fourth quarter of 2003, compared with $574 million in the year-ago quarter, excluding special items. The fourth- quarter-2003 results reflected sharply higher profits in the company's Asia Pacific operations, reduced losses in Europe, lower income in North America, and increased losses in Latin America. For all of 2003, GM's automotive operations earned $1.1 billion, compared with $2.6 billion in 2002. The deterioration in profitability is partially attributable to higher pension and health-care costs in the U.S.
GM increased its global market share to 15.2 percent in the fourth quarter of 2003 from 15.1 percent the prior year. For the full year, three out of four automotive regions posted gains, although GM's global market share declined to 14.7 percent from 15.0 percent. The decline reflects primarily the mix effect of strong industry growth in Asia where GM's share is less than its global share.
GM North America (GMNA) earned $397 million in the fourth quarter of 2003, compared with $644 million in the year-ago period, as lower production volumes and higher pension and health-care costs were partially offset by strong cost performance and favorable mix. For 2003, GMNA earned $1.2 billion, down from $3.1 billion in 2002.
Despite strong gains in the second half of the year, GM's share of the U.S. market in 2003 was 28.0 percent compared with 28.3 percent in 2002.
"While overall market share was down, we were pleased with our sales momentum in the second half of 2003 when our market share was 28.7 percent," Wagoner said. "As we continue our aggressive new-product cadence, we are optimistic about increasing market share in 2004.
"Over the last few years, we have significantly improved the quality and competitive position of our vehicles," Wagoner said. "This trend continued in 2003 with Cadillac leading the way. There's still more to do, but we believe our cars and trucks are beginning to change consumer perceptions."
GM Europe (GME) reported a loss of $66 million in the fourth quarter of 2003, compared with a loss of $129 million a year ago as continued material and structural cost reductions were partially offset by foreign-exchange losses, continued price pressure and unfavorable mix. For 2003, GME had a loss of $286 million, an improvement from the $549 million loss in 2002.
"While we're disappointed that we fell short of our financial targets in Europe, we continue to make good progress on cost reduction," Wagoner said. "In 2004, we expect to improve our operating performance as we launch new models such as the Opel Astra, Vectra wagon and a new, small convertible."
GM Asia Pacific (GMAP) earned $177 million in the fourth quarter of 2003, a significant improvement from year-ago earnings of $66 million. Continued strong performance by Shanghai GM in China and Holden in Australia, together with improved results from GM's equity alliances, contributed to GMAP's performance. For all of 2003, GMAP earned $577 million, more than three times the net income of $188 million in 2002.
"GM's Asia Pacific operations delivered great results in 2003, led by China and Australia," Wagoner said. "In 2003, China became the world's third-largest market, and we expect sales to continue to grow this year. GM is well positioned to participate in this growth through its joint ventures in China."
GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $112 million in the fourth quarter of 2003, compared with a loss of $7 million in the year-ago period. For all of 2003, GMLAAM reported a loss of $331 million, up from a loss of $181 million in 2002. Results for 2003 in Latin America were negatively affected by weak economic conditions and an asset write-down in Brazil.
GMAC reported record fourth-quarter income of $630 million in 2003, up 20 percent from the $524 million earned in the fourth quarter of 2002. All three of GMAC's business units -- Financing, Insurance and Mortgage Operations -- reported improved results during the quarter.
For calendar year 2003, GMAC posted another record year with income of $2.8 billion, compared with $1.9 billion in 2002. Earnings from financing operations improved as lower credit provisions offset the negative impact of narrower net-interest margins. Insurance operations benefited from higher underwriting income and a reduction in capital losses related to its investment portfolio. Income from mortgage operations more than doubled, reflecting record originations in both the residential and commercial mortgage sectors.
"GMAC had an outstanding year in 2003," Wagoner said. "In addition to delivering its ninth-straight year of earnings growth, GMAC also did a terrific job of diversifying its funding sources and supporting GM's auto sales around the globe."
General Motors also announced that its approximately 125,000 hourly employees in the United States will receive a profit-sharing payment in 2004. A typical U.S. hourly employee, eligible under the profit-sharing program, would qualify for a payment of approximately $170.
GM expects global auto-industry sales to rise about 3 percent in 2004 to a record 60 million vehicles. In the United States, GM expects total U.S. industry vehicle sales of approximately 17.3 million. GM expects robust industry growth in Asia Pacific with moderate growth in Europe and the LAAM region.
GM expects to generate $5 billion in operating cash in 2004. In addition, GM estimates that earnings in the first quarter of 2004 will be approximately $1.75 per share, excluding any special items and at current dilution levels. For the 2004 calendar year, GM's earnings target is $6.00 to $6.50 per share, excluding any special items and at current dilution levels. (The dilution calculation may be affected by the Series C Convertible Senior Debentures issued by GM in July of 2003 and due in 2033.)
In this press release and related comments by General Motors management, our use of the words "expect," "anticipate," "estimate," "project," "forecast," "outlook," "target," "objective," "plan," "goal," "pursue" and similar expressions is intended to identify forward looking statements. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K (at page II-18) which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: changes in economic conditions; currency exchange rates or political stability; shortages of fuel, labor strikes or work stoppages; market acceptance of the corporation's new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and, the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and times planned by management.
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In this press release and related comments by General Motors management, our use of the words "outlook," "expect," "anticipate," "estimate," "forecast," "project," "likely," "objective," "plan," "designed," "goal," "target," and similar expressions is intended to identify forward looking statements. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors that are described in GM's most recent report on SEC Form 10-K (at page II-15, 16) which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: changes in economic conditions, currency exchange rates or political stability; shortages of fuel or interruptions in transportation systems, labor strikes or work stoppages; market acceptance of the corporation's new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and times planned by management.
In connection with the proposed transactions, General Motors Corporation ("GM"), HEC Holdings, Inc. ("Hughes Holdings") and EchoStar Communications Corporation ("EchoStar") have filed amended preliminary materials with the Securities and Exchange Commission ("SEC"), including a Registration Statement of Hughes Holdings on Form S-4 that contains a consent solicitation statement/information statement/prospectus. These materials are not yet final and will be further amended. Holders of GM $1-2/3 and GM Class H common stock are urged to read the definitive versions of these materials, as well as any other relevant documents filed or that will be filed with the SEC, as they become available, because these documents contain or will contain important information. The preliminary materials, the definitive versions of these materials and other relevant materials (when they become available), and any other documents filed by GM, Hughes Electronics Corporation ("Hughes"), Hughes Holdings or EchoStar with the SEC may be obtained for free at the SECs website, www.sec.gov, and GM stockholders will receive information at an appropriate time on how to obtain transaction-related documents for free from GM.
GM and its directors and executive officers, Hughes and certain of its officers, and EchoStar and certain of its executive officers may be deemed to be participants in GM's solicitation of consents from the holders of GM $1-2/3 common stock and GM Class H common stock in connection with the proposed transactions. Information regarding the participants and their interests in the solicitation was filed pursuant to Rule 425 with the SEC by EchoStar on November 1, 2001 and by each of GM and Hughes on November 16, 2001. Investors may obtain additional information regarding the interests of the participants by reading the amended preliminary consent solicitation statement/information statement/prospectus filed with the SEC and the definitive consent solicitation statement/information statement/prospectus when it becomes available.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Materials included in this document contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. The factors that could cause actual results of GM, EchoStar, Hughes, or a combined EchoStar and Hughes, to differ materially, many of which are beyond the control of EchoStar, Hughes, Hughes Holdings or GM include, but are not limited to, the following: (1) the businesses of EchoStar and Hughes may not be integrated successfully or such integration may be more difficult, time-consuming or costly than expected; (2) expected benefits and synergies from the combination may not be realized within the expected time frame or at all; (3) revenues following the transaction may be lower than expected; (4) operating costs, customer loss and business disruption including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers, may be greater than expected following the transaction; (5) generating the incremental growth in the subscriber base of the combined company may be more costly or difficult than expected; (6) the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; (7) the effects of legislative and regulatory changes; (8) an inability to obtain certain retransmission consents; (9) an inability to retain necessary authorizations from the FCC; (10) an increase in competition from cable as a result of digital cable or otherwise, direct broadcast satellite, other satellite system operators, and other providers of subscription television services; (11) the introduction of new technologies and competitors into the subscription television business; (12) changes in labor, programming, equipment and capital costs; (13) future acquisitions, strategic partnership and divestitures; (14) general business and economic conditions; and (15) other risks described from time to time in periodic reports filed by EchoStar, Hughes or GM with the Securities and Exchange Commission. You are urged to consider statements that include the words "may," "will," "would," "could," "should," "believes," "estimates," "projects," "potential," "expects," "plans," "anticipates," "intends," "continues," "forecast," "designed," "goal," or the negative of those words or other comparable words to be uncertain and forward-looking. This cautionary statement applies to all forward-looking statements included in this document.
Letter to Stockholders
terrorism. We focused on a clear strategy:
And that's exactly what we did.
The genesis of this progress is the broad reorganization of GM in the 1990s, which touched virtually every part of the company. Our focus has been to take full advantage of a true GM competitive advantage our size and our global resources.
But in addition to leveraging our size, we understand that to win in today's competitive auto market, we also need to be fast. One significant tool GM has used to break down the old walls of bureaucracy and slowness is our GoFast! program. These one-day workshops are aimed at quickly eliminating waste and increasing efficiency through brainstorming and sharing of best practices. They empower every employee to improve our business.
In the past three years, more than 80,000 GM employees have attended more than 6,600 GoFast! workshops. The workshops have saved GM hundreds of millions of dollars.
We have been able to significantly reduce the time it takes to launch new vehicles, while simultaneously improving quality and productivity. In 2002, we also expanded implementation of the GM Global Manufacturing System, which is increasing the flexibility of our plants, boosting productivity and allowing us to respond more quickly to changes in demand.
Our progress has been real and measurable. But our work is not done far from it.
Like many other large, long-standing businesses, GM is dealing with some tough issues related to our history the "legacy costs" of rising pension and health-care obligations for our large retiree base.
We're doing so by focusing on growing our business and generating cash. We plan to take advantage of our strong operating cash flow and other assets on our balance sheet to make contributions to the pension fund without affecting the funding required for our future product program. At the same time, we are aggressively working to contain health-care costs as part of our relentless focus on improving all aspects of our cost structure.
While we've made a lot of progress on our cost competitiveness over the past decade, we believe many opportunities remain to drive greater efficiency, to improve quality and reduce waste, and to react even faster to problems and challenges as they arise around the world.
The global auto industry is far from mature in terms of growth potential. Consider that only 12 percent of the world's potential drivers own or drive a vehicle today.
China's growth has been phenomenal, reinforcing our decision several years ago to invest in the potential of the world's most populous nation. That market grew 40 percent last year, and we anticipate another 40 percent expansion by 2007.
Shanghai GM, our joint venture with Shanghai Automotive Industry Corporation Group (SAIC), reached a milestone in December when it introduced the redesigned Buick Regal family of midsize sedans. This represented the first time we had leveraged local engineering capability and completed a redesign within China for Chinese customers.
Our new partnership with SAIC and Wuling Automotive gives GM product entries in China's minivan and small truck segments. And our latest venture with SAIC, to take over Yantai Bodyshop Corporation, will give Shanghai GM another 100,000 units of capacity to better respond to the rising demand.
GM is well-positioned to take advantage of the other emerging growth markets around the world. Our investment in the new GM Daewoo gives us a strong position in the important South Korean market and an excellent product development capability; this investment promises to pay off sooner than expected as growth throughout the Asia Pacific region continues.
But we are also bullish on North America's market potential over the mid- and long term. Due to immigration and higher birth rates, the U.S. population is growing faster than expected. Add the huge baby boomer generation that is moving into its peak earning and consuming years, and the fact that vehicle prices are at their lowest level in decades in real terms, and you have a recipe for continued strong demand.
But we know our competition is not standing still. At the Detroit auto show this past January, there were 61 new production and concept vehicles on display from the world's automakers. We're taking on that challenge with more than 30 launches of all-new cars and trucks scheduled this year around the globe.
Despite our progress, we know that there's plenty more to do. Too many potential customers don't consider buying our products. In some cases, they may have had a serious disappointment with a GM car 20 years ago. In others, they just believe that another brand is better.
We aim to change that.
It starts, of course, with our products. GM is infusing its lineup with the kind of well-built, stylish, innovative, emotionally compelling cars and trucks that GM was known for when it was the undisputed leader of the automotive world.
GM's renewed passion for creating exciting, innovative cars and trucks is evident on the auto show circuit as well as in our showrooms. We were honored with 149 vehicle awards around the world in 2002.
In 2003, we'll introduce three exciting "halo" vehicles in the United States: The innovative Chevy SSR roadster/pickup; the legendary Pontiac GTO, based on the high-performance Holden Monaro coupe in Australia; and Cadillac's first two-seat roadster, the stunning XLR. Last fall, 99 special first edition XLRs sold out through the 2002 Neiman Marcus Christmas catalog in a record 14 minutes.
Those vehicles will be joined by the Cadillac SRX, the all-new Chevrolet Malibu and Malibu Maxx, the redesigned Pontiac Grand Prix, the Saturn ION Quad Coupe, the GMC Envoy XUV, the Buick Rainier and Cadillac ESV sport utilities, the Saab 9-3 Convertible, the Chevy Aveo four-door and five-door subcompacts, and the Chevy Colorado and GMC Canyon midsize pickups. We expect the Chevrolet Malibu, Colorado and coming Equinox compact SUV (in 2004) alone to account for 500,000 units of annual volume.
In Europe, in addition to the new Saab 9-3 Convertible, we'll debut the Opel/Vauxhall Signum and Vectra Wagon, along with the innovative Meriva five-door that will compete in the subcompact "monocab" segment. Opel and Vauxhall also will get another version of their high-performance roadster with the introduction of the Speedster Turbo. Four new fuel-efficient diesel engines will be introduced this year in Europe.
In the Asia Pacific region, we will introduce the Saab 9-3, Cadillac CTS and Opel Vectra, and in China we will launch another all-new Buick sedan.
In GM's Latin America/Africa/Mid-East region, 2003 will mark a major expansion of our product lineup in the growing Mid-East market. Twenty products new to the region will be launched, including the Chevrolet Barina GM's first entry into the low end of that market the HUMMER H2, Cadillac XLR and SRX, Opel Vectra GTS and Signum, and the extended versions of the Chevrolet TrailBlazer and GMC Envoy.
GM's momentum today is due in very large part to the leadership, wisdom and foresight of our chairman, Jack Smith. Jack retires in May after 42 years of service to this corporation. Probably the most humble chairman in big business today, Jack would be the last one to take credit for all that he has done.
So, on behalf of all the men and women of General Motors, I'd like to go on record to thank Jack Smith for saving GM from its long decline. Ten years ago, when he was facing the seemingly insurmountable task of righting the listing bureaucracy that was then GM, he spelled out in the annual report this simple promise to you, our stockholders: "We know what we have to do, and we're going to do it. Watch and see."
That was classic Jack: a modest but determined leader whose credo, "deeds, not words," often seemed out of step in the decade of the celebrity CEO. But Jack Smith got GM back on the road to sustained success, and we're determined to build on his record of progress.
GM's future success will depend on our ability to develop and rev up new engines for growth. That means being quick to fill the next new vehicle segments and niches, being proactive in the emerging growth markets around the world, and delighting our customers with innovations the competition doesn't have. We also must keep a strong focus on getting leaner, faster and more responsive, and continue to leverage and grow the vast talent and knowledge within GM.
The men and women of GM are confident and excited about the future. But we also understand that in today's global marketplace, we cannot afford to be complacent based on what we achieved last year, last month or even yesterday. Today we celebrate on the run, and move quickly onto the next challenge.
I started out by noting that our strategy in 2002 was focused and clear and that it worked. We're going to follow that same strategy in 2003: Introduce great cars and trucks, be aggressive in the marketplace, reduce costs and improve quality, and generate cash.
As a very wise man once said: "We know what we have to do, and we're going to do it. Watch and see."