General Motors Corp. yesterday reported a 2 percent decline in first-quarter earnings, which was considerably better than analysts expected.
Thanks in part to the record pace of U. S. car and light truck sales during the three months that ended March 31, the world's largest automaker posted a profit of $1.78 billion. This is down from $1.82 billion in the first quarter of 1999.
On a per-share basis, earnings amounted to $2.80, up from $2.66 in the year-earlier period. Earnings per share rose because GM had 4.5 percent fewer shares outstanding during the quarter that just ended because of stock buybacks. Analysts were predicting earnings of $2.66 cents a share.
Sales jumped 10.4 percent to $46.9 billion from $42.4 billion in the 1999 quarter.
"We kept our momentum going in the first quarter," John F. Smith Jr., chairman and chief executive, said in a prepared statement.
He added that "record market demand in North America and Europe was accompanied by unrelenting competitive pressures, while economic conditions continued to affect markets in the Latin America and Asia-Pacific regions."
Concerning market pressures, David Healy, an auto analyst with Burnham Securities, pointed out that GM paid out nearly $1,600 in rebates and incentives on each vehicle it sold in the United States. This was about $500 more than in the corresponding period last year, he said.
"The higher rebates acted as a kind of a headwind," putting pressure on profit margins, Healy said.
The auto industry is on pace to sell a record 18.3 million cars and light trucks in this country this year. At this point last year, the industry was on a pace for 16.4 million annual sales. GM's vehicle sales were up 9 percent in the quarter.
Despite the robust times, GM is still struggling to hold its own in the market. Its U.S. market share dipped slightly in the quarter to 28.6 percent from 28.8 percent in last year's first quarter.
Higher gasoline prices seemed to have little, if any, financial impact on GM's first-quarter operations. There was strong consumer demand for the company's high-profit, gas-guzzling pickup trucks, sport utility vehicles and luxury cars.
In other operations, GM's finance-arm GMAC, posted a slight gain in earnings to $397 million, up from $392 million.
Hughes Electronics, which continues to invest heavily in the growth of its DirecTV business, had a net loss of $77 million. For the corresponding period last year, Hughes posted a profit of $78 million.
GM's stock closed yesterday at $88, up 50 cents.
Bloomberg News Service contributed to this article.