General Motors Says It Will Be Profitable In 2002

Autoparts Report, Nov 18, 2001

General Motors Corp. said it expects its North American operations to turn a profit in 2002, but the company will have to cut costs to do it. GM reported a profit of $251 million in the third quarter for its North American operations and increased its share of the U.S. market nearly 3 percent to 27.7 percent in the period. In October, GM reported record vehicle sales, rising 31 percent over those during October 2000.

Ford Motor Co. and the Chrysler Group of DaimlerChrysler AG saw sales increases of 36.3 percent and 5 percent, respectively. Part of the sales surge tied to the offer of no-interest financing, which GM, Ford and Chrysler initiated in a bid to get consumers spending again following the Sept. 11 terrorist attacks.

While the no-interest financing resulted in a sales spike, it also took a deep bite out of each automaker's profit margins. GM said it will extend the zero interest offer until early January, and other auto producers will likely follow GM's lead.

Meanwhile, sales of cars and trucks, however, are expected to cool off considerably, perhaps by a much as a million vehicles next year. Analysts predict total sales for 2001 will be as low as 15.2 million units.

To counteract the expected revenue shortfall, GM is setting its sights higher for cost cutting, a spokesman said.

To accomplish that goal, GM and its suppliers work together in a cost-savings sharing program. Suppliers offer their ideas for reducing costs, GM decides if they're suitable and then picks up part of the cost for implementing the ideas. Earlier, Ford Motor Co. said as part of its cost-cutting measures, it is reducing by 7 percent the amount it pays to outside contractors who provide services ranging from office and clerical work to engineering.