DETROIT -- General Motors said on Tuesday its first-quarter earnings rose sharply, but warned that it may not meet its earnings target for the full year due to uncertain global economic conditions.
GM's earnings warning sent U.S. stocks lower and pushed U.S. government bonds and Euro zone government bond futures higher.
The Detroit automaker's shares were down $1.12, more than 3 percent, to $35.00 in early trading on the New York Stock Exchange.
"The GM numbers were taken on board badly because right now people need reassurance that data and corporate earnings are looking up after the Iraq conflict. GM's goes against that grain," said one bond futures trader in London.
GM, the world's largest automaker, said its earnings rose to $1.48 billion or $2.71 per share, up from $228 million or 57 cents per share in the year-ago quarter. Results were boosted by a one-time gain of $505 million from the sale of its defense unit and stronger results from its automotive operations.
Last year, GM took several one-time charges totaling $417 million, most resulting from job cuts and write-downs at its European automotive operations.
Despite the gains, GM warned that its full year target of $5.00 per share, excluding results from its Hughes Electronics Corp. unit, was now uncertain.
GM's U.S. market share fell during the first quarter, and margins have been hit by escalating incentive costs. Earnings have also been hurt by increasing costs for its massive U.S. pension, which ended 2002 underfunded by $19.3 billion.
Analysts' forecasts for GM's 2003 earnings range between $3.49 and $6.19 per share, with a mean estimate of $4.63 per share, according to research firm Thomson First Call.
The automaker, which in the past two years has staged a strong comeback and consistently beat Wall Street earnings estimates, said it would not provide a new target for its 2003 earnings.
Excluding the one-time gain, GM earned $978 million or $1.81 per share in the first quarter. That result was on the high side of Wall Street forecasts for earnings per share between $1.00 and $1.85, with an average forecast of $1.54, according to Thomson First Call.
In January, GM said it expected first-quarter earnings of $1.45 per share, including a loss of 5 cents per share from Hughes Electronics.
GM's automotive operations earned $546 million in the first quarter, up from $496 million last year. However, earnings from its core North American automotive operations fell to $548 million in the first quarter from $654 million a year earlier after Detroit's price war, higher pension costs and currency exchange losses offset cost cuts.
GM said it expected second quarter earnings, excluding Hughes and special items, of "at least" $1.00 per share, at the low end of Wall Street forecasts. Analysts' forecasts, including Hughes, range between $1.00 and $2.36 per share, with a mean estimate of $1.37 per share, according to First Call.
Bear Stearns analyst Domenic Martilotti said that the weak second quarter earnings outlook indicates that GM won't let up in its aggressive but costly incentives, which during the first quarter failed to add sales at the same rate as in previous quarters.
"Given current production levels, that's a pretty weak earnings number," Martilotti said. "So that would be indicative to me that they're going to be very aggressive on pricing throughout the second quarter."
GM's consumer incentives rose 42 percent in March from last year to $2,915 per vehicle, according to Autodata. In early April, GM stepped up the price war, offering zero percent financing for up to five years on almost every vehicle it sells, and offering buyers the chance to test drive most GM vehicles overnight.
Ford Motor Co., scheduled to report its first-quarter results on Wednesday, is expected to return to profitability as cost cuts from its ongoing restructuring offset lower car and truck sales.