Strikes Drive Profit Down 51% at GM

DETROIT — General Motors Corp. reported a 51% decline in fourth-quarter earnings Tuesday and lost money on its North American vehicle operations, mostly due to U.S. work stoppages and increased costs of new-model introductions.

Strikes at several plants during last fall’s contract negotiations with the United Auto Workers reduced the auto maker’s quarterly earnings by $700 million. For the year, GM said UAW strikes reduced earnings by $1.2 billion.

GM’s profit was further squeezed by higher marketing costs for 15 newly launched cars and trucks. The nation’s No. 1 auto maker is banking on the new products to spur sales and staunch its market share losses in 1997.

“The quarter was ruined by the strikes,” said analyst David Healy of Burnham Securities in New York. “But even without the strikes, the profit margins were disappointing.”

GM’s quarterly profit from continuing operations were $786 million, or 92 cents a share, down from $1.59 billion, or 1.95 cents a share, a year ago. The results exclude Electronic Data Systems, which GM split off in June.

Earnings for the year were down 17%. GM earned $5 billion last year from continuing operations, compared with $6 billion in 1995. Revenue was down slightly in the fourth quarter but up 2.4% for the year, to $164.1 billion.

The operating results, excluding some favorable tax gains, were in line with Wall Street expectations. GM stock fell $1.125 to close at $60.75 in trading Tuesday on the New York Stock Exchange.

The impact of the strikes and vehicle launches hit the company’s core North American auto operations hard. GM lost $124 million in North America in the fourth quarter, compared with a profit of $603 million a year ago.

While the labor and product disruptions hurt the financial results, GM is much stronger financially than just a couple of years ago, when its U.S. auto operations were hemorrhaging red ink. GM finished 1996 with $17 billion in cash, prompting the decision Monday to increase its dividend and begin a $2.5-billion stock buyback plan.

The company’s future financial health rides, in part, on its ability to maintain labor peace. GM has been hit with several crippling local strikes in the past year and still has about 40 local contracts unsigned, raising the threat of more unrest.

The latest strike was settled Tuesday after a four-day walkout by 4,100 members of the International Union of Electrical Workers at a Moraine, Ohio, assembly plant that makes the Oldsmobile Bravada, Chevrolet Blazer and GMC Jimmy.

Just as important as labor peace is GM’s revamped car and truck lineup. The 15 new models now hitting showrooms account for 20% of GM’s vehicle production and are “the key to our plans to aggressively increase market share,” GM Chairman John F. “Jack” Smith said.

GM held just 31% of the market at year-end, down from 32.4% in 1995 and more than 60% in the days before Japanese vehicles entered the market. Top GM executives vow to reverse the market erosion this year and set a goal of attaining 33% in 1997.

GM’s international operations earned $353 million, down from $498 million a year ago.

Ford Motor Co. is expected to report strong earnings today as a result of brisk U.S. truck sales. Last week, Chrysler Corp. reported a fourth-quarter profit of $808 million, up 22%, capping its second-best year.