GM General Motors Company

By Mike Colias and Chester Dawson 

Shares in General Motors Co. and Fiat Chrysler Automobiles NV rallied Tuesday even as conditions in the core U.S. auto industry soften, the latest sign Wall Street is willing to give Detroit credit for using a string of record profits to reduce debt and sharpen focus on future technology.

The two auto makers reported dramatically different bottom-line performances in the third-quarter, with GM posting a nearly $3 billion net loss related to the sale of its money-losing European business and production declines in North America. Fiat Chrysler earned $1 billion over the same period on a net basis, up 50% from the third quarter in 2016.

Investor attention, however, has been trained on the companies' futures.

GM has been pouring money into moonshot technologies, including autonomous vehicles, while retreating from poor-performing markets. The auto maker's revenue fell sharply to $33.6 billion during the quarter, a testament to the company's exit from Europe, India and Russia, and pullback from low-margin businesses in the U.S., including passenger cars and sales to rental companies.

Fiat Chrysler, meanwhile, has been chipping away at debt amid continued interest in finding a partner to merge with. Chief Executive Sergio Marchionne has been late to self-driving car development and electric vehicles, but argues Fiat Chrysler needs to find more scale through a merger before it can effectively compete in those areas.

Shares of GM traded up 2.49% at $46.27 Tuesday morning near their postbankruptcy high point, while Fiat Chrysler traded up 3.96% at $17.22. The continued momentum represents a shot in the arm for at least two of the domestic auto makers that spent several years with market valuations stuck in neutral despite record sales in the U.S. market.

Ford Motor Co. reports third-quarter earnings Thursday. Shares of the No.2 U.S. auto maker, however, haven't budged much even after the company changed CEOs in May.

Delphi Automotive PLC said Tuesday that it has agreed to buy a self-driving startup for $450 million, boosting the automotive supplier's drive to bring autonomous vehicles to market by the end of the decade.

Delphi's purchase of nuTonomy Inc., a Boston-based software firm focused on automated driving technology firm, positions the combined company as one of the leading players globally in a rapidly developing future market for partially or fully self-driving cars. It comes as part of Delphi's plan to transition from a hardware-dependent component maker to a software-focused service supplier.

GM's bottom line included a $2.3 billion expense from a tax allowance that went away following the August sale of GM's Opel European unit to French car maker Peugeot. GM said net profit was $115 million on continuing operations, minus the year-ago results from the business in Europe.

Operating profit from continuing operations dropped 31% to $2.5 billion, hurt by production cuts in North America. Several factories were idled during the quarter to prepare for new-model launches. GM also has moved aggressively to cut passenger-car production in the face of weak demand, and it continues to trim less-profitable car sales to rental agencies.

The production pullback is a hangover effect from the first half of the year, when GM overbuilt at several factories in anticipation of plant downtime in the third and fourth quarters. But auto makers also have suffered from a severe downturn in demand for passenger cars, which forced GM to cut about 3,000 workers across several U.S. car plants this year.

GM's third-quarter production in North America fell 25%, according to WardsAuto.com, contributing to an 8.3% decline in operating profit. Finance Chief Chuck Stevens said the result "demonstrates resilience" in the North American business given the lower output, and credited GM's recent efforts to cut costs.

GM shares have rallied over the last two months amid analyst focus on advancements in the auto maker's driverless-car program and other advanced technology. Barclays analyst Brian Johnson said in a research note Monday that a better-than-expected quarter from GM even amid the production cuts could help sustain investor momentum.

"We think this quarter could provide yet another data point that the investor perception of GM is shifting," Mr. Johnson said.

Fiat Chrysler shipments in North America -- its largest region -- fell 6% to 592,000, and overall revenue fell 2% to $31 billion.

Fiat Chrysler reported lower-than-expected net debt in the most recent quarter, Evercore ISI said Tuesday, helping lower the auto maker's financing expenses and lifted adjusted operating profit to a record.

Allison Prang contributed to this article

Write to Mike Colias at Mike.Colias@wsj.com and Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

October 24, 2017 10:41 ET (14:41 GMT)

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