General Motors profits plunge

General Motors hopes a range of daring new cars will find customers

General Motors, the world's largest carmaker, has seen its profits halved during the last three months of 2000.

The news was bad on all fronts: GM's home market, North America, was battered, while all its overseas operations - in Asia, Europe and Latin America - sank deep into the red.

They [GM] told us it would be ugly, and it's ugly

Michael Ward, Salomon Smith Barney

In continental Europe the situation was so bad that the chief executive of its German-based Adam Opel subsidiary, Robert Hendry, announced his resignation.

GM is not the only firm in trouble. Its two big US rivals - Ford and DaimlerChrysler - are both struggling to cope with a shrinking market and cut overcapacity and costs.

'It's ugly'

During the fourth quarter, GM's profits dropped to $609m (£414m), down from $1.255bn a year earlier.

To make things worse, one-off costs of $520m gobbled up most of what was left in earnings.

To GM's executives, it was of little comfort that these figures were slightly better than Wall Street expectations.

GM is hurting from shrinking profit margins, which come against a background of shrinking turnover - down more than one billion dollars to $45bn, and a falling market share - now 27.3% compared with 27.9% a year earlier.

Michael Ward, car industry analyst with Salomon Smith Barney, said: "They [GM] told us it would be ugly, and it's ugly".

Cutbacks

GM's chief executive, Rick Wagoner, said he hoped that the "recent industry slowdown in North America and Europe will prove to be a temporary correction", but said "strong actions" were required to "achieve improved performance in the future".

GM has already announced that it will cut its workforce by 16,000 people or about 4%, close its Oldsmobile division in the United States and phase out the Luton car factory of its British Vauxhall subsidiary.

Taking the blame for GM's European troubles was Robert Hendry. Mr Hendry had failed to turn around the struggling Opel subsidary, which supplies most of Europe, and trades under the name of Vauxhall in the United Kingdom.

During the past year, the firm suffered a loss of 427m euros ($406m; £270m). In 1999, Opel had made a profit of 195m euros. "I wish we had an overnight push-one-button fix... in Europe", said GM's chief financial officer, John Devine.

Rumours in the German media suggest that a former BMW executive, Carl-Peter Forster, might succeed Mr Hendry.