Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, July 29, 1994                   TAG: 9407290074
SECTION: BUSINESS                    PAGE: A9   EDITION: METRO 
SOURCE: New York Times
DATELINE: DETROIT                                 LENGTH: Medium

GM BOASTS $1.9 BILLION EARNINGS

For the quarter that ended in June, GM earned $1.92 billion, or $2.23 a common share, more than twice the $889 million it made in the period a year earlier. Rebounding from a loss of $33 million last year, GM's crucial North American operations contributed the most to the bottom line in the quarter, $723 million.

GM's earnings were buoyed by strong sales in Latin America and Europe. With cash pouring in, GM announced Thursday that it had set aside $2.5 billion for its underfinanced pension plans, bringing to $4.4 billion the total it has contributed this year.

The company, the world's largest automaker, attributed its turnaround in North America to three main factors: productivity gains and cost cutting; an increase of 7.2 percent, to 1.54 million, in its sales to dealers and other wholesale customers; and rising prices.

The last two factors arose from the strength of the domestic auto market, which GM predicted would last at least until 1996.

But Chief Financial Officer J. Michael Losh said that to keep increasing efficiency, General Motors had to ``act with a sense of urgency like that downturn could happen tomorrow.''

Losh said the quarter was less profitable than the company would have liked, because GM's mix of sales emphasized less profitable small cars like the Chevrolet Cavalier rather than light trucks like the Chevrolet Blazer.

GM is increasing its light truck capacity, but still cannot build enough to satisfy demand. Long production shutdowns to prepare for model changeovers also bit into sales, Losh said, while high overtime and freight costs at some plants cut into profits.

``They were under some pretty difficult performance conditions,'' said Wendy Beale Needham, auto industry analyst for Donaldson, Lufkin & Jenrette in New York. ``But it was a great quarter.''

Ford Motor Co. reported quarterly earnings of $1.71 billion, an all-time record, on Wednesday, while Chrysler Corp. reported record earnings of $956 million on July 14.

The second quarter tends to be the strongest period for automakers, partly because of production shutdowns at other times of the year and because customers tend to flock to dealerships in the spring.

Needham of Donaldson, Lufkin & Jenrette said cost-saving changes made years ago in the way GM designed its vehicles would soon pay off.

For example, she said, GM designed its next-generation Cavalier, scheduled to appear in showrooms later this year, so that the car required 25 percent fewer parts and 30 percent less labor to build.

After taxes, GM averaged a profit of $650 on each vehicle it sold worldwide in the quarter, up from about $265 the year before. By contrast, Chrysler averaged an after-tax profit of about $1,360 on each vehicle it sold in the quarter, and Ford made $945.

Like Ford and Chrysler, GM has fattened its profits by scaling back less profitable sales to commercial fleets and reducing rebates and other incentives to retail customers. GM's average retail incentive dropped in the quarter to $750, from $850 a year ago.