General Motors

(GM) - Get Report

said its 2003 earnings will fall from 2002's on a tripling of the expense it faces to fund its multibillion-dollar pension plan.

The company also lowered the expected rate of return on its pension assets, a move that could crimp earnings in years to come.

Excluding its Hughes Electronics unit, GM expects to earn $5 a share in 2003, down from the $6.75 it's forecasting for 2002. Still, both results are better than analysts were predicting. The company said its pretax pension expense will be $3 billion next year, up from $1 billion in 2002.

As had been expected, the Detroit-based automaker also said it will reduce its estimate of the pension portfolio's return to 9% for 2003 from 10% in 2002, reflecting the recent three-year bear market. GM is one of the

S&P 500's

most underfunded companies on an absolute basis, with a projected deficit of more than $19 billion at the end of 2002. GM's pension investments lost about 7% in 2002.

At its North America unit, GM expects to earn between $1.7 billion and $1.9 billion in 2003, while at its European division, it's projecting results of break-even to a loss of $200 million.

"We're focused on executing a global plan to win more market share, improve our profitability, and capitalize on new opportunities to grow our automotive business in both developed and emerging markets," said GM president and chief executive officer Rick Wagoner.

Capital spending is expected to rise to about $3 billion in 2003, before tax, from about $1 billion in 2002. Strong cash generation in 2002 enabled GM to contribute a total of $4.8 billion to its U.S. pension plans, including a hefty $2.6 billion cash contribution in the fourth quarter.

The shares were trading up $1.08, or 2.8%, at $39.29 around midday on the

New York Stock Exchange. On Wednesday, the stock fell about 4% on chatter that a cut in its pension return rate would force the company to pare 2002 earnings estimates.