North American sales drive GM to $1.48 billion profit
- North America offsets Europe losses
- Profit is 89 cents per share
- Net revenue was $37.6 billion
General Motors reported third-quarter earnings of $1.48 billion, or 89 cents per share, this morning as robust profits in North America more than offset continuing losses in Europe.
The quarter's results were a decline of 15% from $1.7 billion, or $1.03 per share, a year ago but still blew through Wall Street expectations. Excluding special items, earnings per share were 93 cents.
Net revenue was up 2% to $37.6 billion vs. $36.7 billion a year ago, about $2 billion more than expected, driven by both volume and higher pricing. Through three quarters this year GM has increased both U.S. sales (up 3.5% year over year) and average transaction price (up 0.6%), according to Edmunds.com data. Its U.S. market share, however, is down to about 18% from more than 20% a year ago when Japanese makers were still recovering from the Japanese tsunami and Thai floods.
GM's quarterly loss was $478 million in Europe, where new-car sales are headed for their weakest year in about two decades and GM Europe, primarily its German Opel operation, has not made money since 1999. The loss in Europe a year ago was $292 million.
GM now estimates its total loss in Europe this year will be $1.5 billion to $1.8 billion. It sees 2013 as being "slightly better" and sees breaking even in Europe "mid-decade."
GM's international operations unit -- which includes China, South Korea and Australia -- posted an operational profit up 89% to $689 million. The South American unit turned to a profit of $114 million from a loss of $44 million a year ago as GM began rolling out a batch of new products.
"GM had a solid quarter because customers around the world love our new vehicles and we're also seeing green shoots take hold on tough issues like complexity reduction, pensions and Europe," said CEO Dan Akerson in a statement.
Analysts will be looking for more details on GM's plans to restructure in Europe. Ford last week announced plans to close three plants there, as it said its losses in Europe this year will be $1.5 billion.
With the presidential election less than a week away, both sides are likely to try to use GM's report to continue their debate over the administration's 2009 auto bailout and bankruptcy restructuring.
But Jessica Caldwell, Edmunds.com' senior analyst, says the third-quarter provides little to chew on. "GM's quarterly earnings will be scrutinized more closely than usual," she says. "But anyone looking for political artillery in these numbers will likely be disappointed. General Motors' global performance is hardly out of line with any other automaker, whether it's the company's strength in the North American market, or its weakness in the European market."
The U.S. government still owns 32% GM's common stock. Mitt Romney has said he would immediately sell the government's GM shares. Obama's Treasury Department officials have said they want to sell but not until the price is right.
GM shares closed Wednesday at $25.50, up $2.22, or 9.5% That remains well off the November 2010 IPO price of $33 and below the about $53 needed for the government to break even on the 2009 bailout.
The European economic crisis has hit all automakers in the region. GM's European plants are operating at 70% of their production capacity, according to Jefferies & Co. analyst Peter Nesvold.
GM has formed an alliance with PSA Peugeot Citroen, buying a 7% stake in the struggling French automaker. The partners expect to save $2 billion a year within five years by coordinating development of four vehicles to be sold starting in 2016 by PSA as Peugeots and Citroens and by GM as Opels and Vauxhalls and through combined purchasing power.
Last week Ford announced it would close assembly plants in Belgium and Britain. GM is talking with German labor unions about closing a plant in Bochum after 2016.
Regarding its effort to cut its huge pension obligations with a buyout plan for salaried retirees, GM said about 30% of eligible recipients accepted the offer. Those who didn't accept the deal had their pension payments transferred to Prudential Insurance, which annualized the payments.
GM said that because of the deal, it would contribute $2.6 billion in cash in the fourth quarter to its salaried pension obligations in the fourth quarter, smaller than its previously projected $3.5 billion to $4.5 billion. It will also record a pretax charge of $2.9 billion, compared with a previous estimate of $2.5 billion to $3.5 billion.
Bomey reports for the Detroit Free Press.