GM Q1 profit beats Wall Street on strong American demand

DETROIT: General Motors Co. reported a first-quarter profit that surpassed forecasts as it was able to boost vehicle prices, especially in North America, and cut losses in its troubled European operations.
GM, whose shares rose 1.4 percent in premarket trading, also said the US economy was improving and it expected its core North American results in the second and third quarters to largely match the first quarter due to scheduled downtime at its large truck plants.
“We’re clearly seeing some improvement in the (US) economy,” Chief Financial Officer Dan Ammann said.
“It’s a modest underlying improvement, but it’s patchy and it won’t necessarily all go in a straight line.”
The quarter included the impact of $800 million in higher vehicle pricing and lower consumer incentives, half of which came in North America. Last year, GM offered heavy consumer incentives to drive sales in the US market, something it did not do this year.
North America has been driving results for much of the industry this quarter, three years after faltering sales in the US market led GM and Chrysler Group LLC to file for government-funded bankruptcy.
Parts maker Lear Corp. yesterday posted a stronger-than-expected profit due to North American demand. Last week GM’s smaller rival Ford Motor posted a higher-than-expected profit of $1.4 billion for the same reason.
Excluding one-time items mostly related to pension accounting in Europe, GM reported a profit of 93 cents per share.
Analysts, on average, expected GM to earn 85 cents per share, according to Thomson Reuters I/B/E/S.
Net income fell to $1 billion, or 60 cents a share, from $3.15 billion, or $1.77 a share, in the same quarter a year earlier. Last year’s quarter included a one-time gain of $1.5 billion related to the sale of stakes in Delphi and Ally.
Revenue for the quarter was $37.8 billion, up 4.4 percent from $36.2 billion a year ago.
GM’s North American unit saw adjusted earnings jump 35 percent to $1.69 billion even as its share of the sales market fell to 16.7 percent from 18.3 percent last year. GM and Ford have both said they were willing to forfeit market share to maintain profits.
GM’s $800 million gain in pricing matched its fourth-quarter performance. By maintaining higher vehicle prices, the world’s largest automaker is improving resale values and making its vehicles more attractive to buyers.
The Detroit company’s European unit, which has been struggling to return to profitability, posted a loss of $256 million. However, the loss was smaller than analysts had expected and an improvement from the previous quarter’s $562 million loss. “Europe remains a work in progress,” GM Chief Executive Dan Akerson said in a statement.
GM’s international operations, which includes China, saw profits slide about 10 percent from last year to $529 million.
In South America, GM returned to a profit of $83 million after a loss of $225 million the previous quarter as it has begun rolling out new vehicles in that region. It had a similar profit in the same quarter last year.
GM ended the quarter with total automotive liquidity of $37.3 billion, largely unchanged with the end of 2011.
FROM: REUTERS