General Motors Third-Quarter Earnings More Than Double -- 2nd Update
October 25 2016 - 9:49AM
Dow Jones News
By Mike Colias
General Motors Co. doubled net income and notched record revenue
in the third quarter amid strong truck sales in the U.S., but
Brexit fallout threatens to derail the auto maker's drive to post
its first annual profit in European operations since 1998.
GM on Tuesday posted net income attributable to common
shareholders of $2.77 billion for the period ended Sept. 30, up
from $1.36 billion reported in the same period a year ago. The
Detroit auto maker said operating profit excluding one-time factors
equaled $1.72 a share, breezing past Wall Street expectations of
$1.45 a share.
Revenue rose 10% to $42.83 billion, a quarterly record for the
company and substantially higher than analyst forecasts of $39.3
billion for the period. Shares of GM rose above $33 in premarket
trading, higher than the initial public offering price in 2010.
The results provide a view into GM nearly three years after Mary
Barra took over as chief executive and encountered a costly safety
crisis that dented earnings and cost billions of dollars to
resolve. While missing a Europe profit target will cloud the
company's string of record earnings performances in recent
quarters, GM has emerged as one of the most profitable mainline car
companies in the world.
It benefited from continued strong pricing on big pickups and
SUVs in North America, its most profitable models, as well as
healthier margins on freshly redesigned cars such as the Chevrolet
Malibu. A sales surge in China, stoked by a government tax
incentive, helped offset pricing pressures from weak demand for
small cars and commercial vans.
GM, however, posted an operating loss of $142 million in Europe,
three months after recording its first quarterly profit in the
region in five years. GM said currency declines and other industry
weakness tied to the U.K.'s vote to exit from the European Union
shaved about $100 million from its business in the quarter and that
it expects the drag to be $300 million in the fourth quarter.
The Brexit impact likely will derail GM's longstanding goal of
turning a profit on the continent in 2016, the first time since
1998. Other auto makers, including the Nissan Motor Co./ Renault SA
alliance, have signaled concerns about the U.K.'s auto industry in
recent months.
"Breaking even this year is going to be very, very challenging,"
Chief Financial Officer Chuck Stevens said while discussing
European operations Tuesday. He said the company had been on pace
to earn money in Europe before the Brexit vote and said GM will
take "whatever actions necessary" to blunt Brexit's impact.
The company could implement cost cuts and change the model mix.
It levied a 2.5% increase in the U.K. on Oct. 1.
The auto maker maintained its annual operating profit guidance,
saying it will finish the year at the higher end of a range that
represents annual record earnings.
GM's broader outlook stands in contrast to the gloomy view from
rival Ford Motor Co., which cut third-quarter guidance on
expectation of weaker demand and is idling several assembly plants
to trim inventories. GM, meanwhile, ratcheted up production 14% in
the quarter, according to an IHS Automotive estimate.
Underpinning the strength is Ms. Barra's strategy to focus on
sales to retail customers, rather than rentals, an effort to
improve vehicle residual values and the image of its brands. The
move has cost the company market share, but has led to margins that
far exceeded 10% for North America in most quarters.
GM's operating income in North America rose 6% as average
purchase prices across models and brands increased nearly $1,500
from a year earlier Still, profit margin in North America dipped to
11.2%, from 11.8%, as the auto maker sold more cars than a year
earlier amid a marketing push for redesigned nameplates like the
Chevy Cruze and Malibu.
In China, GM's operating income was flat at $459 million. Its
profit margin fell to 8.7%, from 9.8%, as stronger sales of its
higher-priced Cadillac and Buick brands were offset by weak car
demand and declining prices on older models. Some analysts expect
sales in China to cool if a sales-tax break on vehicles with
smaller engines expires at year-end as expected.
GM trimmed losses in South America to $121 million, from $217
million, amid continued belt-tightening in the troubled region. GM
has raised prices to offset declining volume and said wholesale
deliveries rose in Brazil, the region's largest market.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
October 25, 2016 09:34 ET (13:34 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Mar 2024 to Apr 2024
General Motors (NYSE:GM)
Historical Stock Chart
From Apr 2023 to Apr 2024