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$1.1 Billion Consolidated Loss; GM Reports First Quarter Financial Results


April 2005
 Filed under: GENERAL MOTORS CORPORATE Car News | GENERAL MOTORS CORPORATE Headlines
DETROIT - General Motors Corp. (NYSE: GM) today reported a loss of $839 million, or $1.48 per diluted share in the first quarter of 2005, excluding special items and a tax-rate adjustment. These results, in line with the guidance GM issued on March 16, 2005, compare to net income of $1.2 billion, or $2.12 per share, in the first quarter of 2004. Revenue fell 4.3 percent to $45.8 billion.
* Q1 Adjusted Loss $1.48 Per Share, Excluding Special Items
* Q1 Reported Loss $1.95 Per Share on Revenue of $45.8 Billion
* Continued Strong Liquidity at GM, GMAC

Consolidated net income for the first quarter of 2005, including special items, was a loss of $1.1 billion, or $1.95 per share. The special items include charges for restructuring in Europe, U.S. salaried attrition programs, and facility impairments, partially offset by recognition of the recurring tax benefits above those reflected in the 15-percent rate used in GM's adjusted earnings. These items had a net unfavorable effect of $265 million, or $0.47 per share in the first quarter of 2005. There were no special items in the first quarter of 2004.

"While most of our business units exceeded expectations, the results at GM North America (GMNA) were clearly disappointing," said GM Chairman and Chief Executive Officer Rick Wagoner. "We have well thought-out plans to address GMNA's poor performance, starting with aggressive product introductions this year, value-focused marketing initiatives, and further reductions in our cost structure, where the greatest need is to address the challenging health-care cost situation."

GM financial results described throughout the remainder of this release exclude special items unless otherwise noted (see "Highlights").

GM Automotive Operations
GM's automotive operations reported a loss of $1.3 billion in the first quarter of 2005, compared with earnings of $561 million in the year-ago quarter.

GM North America accounted for this weak performance, reporting a loss of $1.3 billion in the first quarter of 2005, compared with earnings of $401 million a year ago. This deterioration reflects lower sales and production volumes, a tougher pricing environment, an unfavorable sales mix, and a continuing, large health-care burden.

GM's market share in North America was 25.2 percent in first-quarter of 2005, down from 26.3 percent in the year-ago period.

"While we were encouraged by improved sales in March, we significantly reduced production volumes during the first quarter to balance inventories," Wagoner said. "These adjustments reduced dealer inventory levels by nearly 100,000 units from the year-ago period, but they also adversely affected our North American financial results.

"We clearly have the need to do a much better job on both the revenue and cost side of our business," Wagoner added. "Our revenue strategy is clear and has already begun to play out. On the cost side of the business, we continue to make progress in most key activities, but we need to accelerate our efforts on the challenging U.S. health-care situation."

GM Europe (GME) posted a loss of $103 million in the first quarter of 2005, an improvement from the $116 million loss in the year-ago quarter.

"Our European operations began to show signs of real progress during the quarter, with the region posting its highest quarterly market share in six years," Wagoner said. "While there is still much work to be done to restore GME to profitability, we're pleased with our improving direction in Europe."

GM Asia Pacific (GMAP) reported net income of $60 million in the first quarter of 2005, compared with $275 million in the same period last year, reflecting primarily lower equity earnings in China and Japan. The region's market share rose to 5.0 percent in the first quarter of 2005 from 4.9 percent in the year-ago quarter.

"GM's Asia Pacific operations delivered profitable results in a challenging environment," Wagoner said. "While net income was down from the year-ago period, we expect stronger profitability in the Asia Pacific region as the year progresses. In China, even though industry sales were down, GM continued to gain market share. We expect to continue to strengthen our product portfolio in China throughout the year as we roll out 10 new or upgraded models."

GM Latin America/Africa/Mid-East (GMLAAM) earned $46 million in the first quarter of 2005, an improvement from year-ago earnings of $1 million. GMLAAM recorded record first-quarter sales volume during the quarter but market share declined slightly to 16 percent in the first quarter of 2005 from 16.2 percent a year ago.

"GMLAAM reported its fifth consecutive quarter of profitability, with several countries reporting record sales volumes and market share," Wagoner said. "We're particularly pleased with our performance in Argentina, Venezuela and South Africa, where we reported double-digit sales gains."

GMAC
General Motors Acceptance Corp. (GMAC) earned $728 million in the first quarter of 2005 compared with $764 million in the year-ago period.

"GMAC delivered solid results in a very challenging environment," Wagoner said. "Although interest-rate pressures have grown, GMAC has been very adept in funding its businesses and maintaining a strong liquidity position. At the end of the first quarter, GMAC had a balance of cash and certain marketable securities of $18.5 billion.

"Much of GMAC's success stems from leveraging its core competencies -- borrowing, lending, collecting and assessing risk -- into diversified business lines that have delivered strong and growing earnings," Wagoner added.

GMAC's financing operations reported net income of $248 million in the first quarter of 2005, compared with $442 million a year ago. The decrease reflects significantly lower net interest margins, partially offset by improved credit experience and stronger used car prices.

Mortgage operations earned $385 million in the first quarter of 2005, up from $231 million in the comparable period last year, reflecting increases in all three of GMAC's mortgage entities - GMAC Residential Mortgage, GMAC Residential Funding Corp. and GMAC Commercial Mortgage. Although mortgage industry volumes in the first quarter of 2005 were down from year-ago levels, GMAC's residential and commercial mortgage units reported higher origination volumes during the quarter and increased market share.

GMAC's insurance operations reported net income of $95 million in the first quarter of 2005, up from the $91 million in the first quarter of 2004. Strong net underwriting revenue and investment income contributed to the results.

GMAC continued to provide global support for the marketing of GM vehicles with a U.S. market penetration of 54 percent of GM's retail sales in the first quarter of 2005, up from 41 percent in the year-ago period. In addition, GMAC served as a significant source of cash flow to GM through the payment of a $500 million dividend in the first quarter of 2005. Cash and Liquidity

Cash, marketable securities, and readily available assets of the Voluntary Employees' Beneficiary Association (VEBA) Trust totaled $19.8 billion on March 31, 2005, excluding financing and insurance operations, down from $23.3 billion on Dec. 31, 2004. The decline reflects lower production volumes, net losses including restructuring charges and the settlement with Fiat S.p.A.

Automotive operating cash flow for the period ended March 31, 2005, totaled a negative $3.0 billion, before European restructuring charges and the Fiat settlement.

Outlook
GM expects total U.S. industry sales in the second quarter of 2005 to come in at a seasonally adjusted annual selling rate of around 17 million, about flat with the selling rate in the first quarter of 2005.

Given the uncertainty affecting key elements of our financial forecast, such as resolution of the health-care cost crisis, GM has determined that it will not provide earnings guidance for the 2005-calendar year at this time.

# # #

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," "on track," 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-20) 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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