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General Motors reports lower profit

GM's first-quarter net income falls 69% from a year earlier, hurt by a $256-million loss in Europe.

May 03, 2012|By Jerry Hirsch, Los Angeles Times
(David Zalubowski, AP )

General Motors Co.posted lower profit in the first quarter but still did better than Wall Street expected based on the strength of U.S. auto sales.

The automaker said it earned $1 billion, or 60 cents a share, in the quarter. That was a 69% drop from the $3.2 billion, or $1.77, GM earned in the same period last year. Revenue grew a little more than 4% to $37.8 billion.

Excluding one-time charges, GM earned 93 cents a share in the quarter that ended March 31, which beat the average of 85 cents a share predicted by Wall Street analysts.

"The U.S. economic recovery, record demand for GM vehicles in China and the global growth of the Chevrolet brand helped deliver solid earnings for General Motors," said Dan Akerson, GM's chief executive.

In North America, GM posted an operating profit of $1.7 billion, a 35% gain from a year earlier. It also made money in China, but operating profit fell to about $529 million from $586 million.

Like Ford Motor Co.and other automakers, GM's problem area is Europe, which suffers from a debt crisis and recession in some nations. GM lost $256 million in the region. It broke even there a year earlier.

"Europe obviously remains a work in progress," Akerson said.

Although the automaker's international business was "not as bad as we had modeled, or many had feared," restructuring GM's European operations to become profitable remains a difficult task, Barclays Capital analyst Brian Johnson said.

"The complexity of the situation and involvement of the unions and politicians will make this a drawn-out process over the next few months," Johnson said.

In the U.S., GM is selling fewer cars but is getting on average about $1,700 more per sale, according to auto price information company

The automaker's share of the U.S. market slipped to 17.5% in the first quarter of 2012 compared with 19.4% a year earlier, according to Autodata Corp.

"Despite hitting its lowest U.S. market share in decades earlier this year, GM's first-quarter earnings are buoyed by a relatively solid performance in North America and continued strong results from China, which help to offset European losses," said Michelle Krebs, an analyst with auto information company

The company faces challenges grabbing back those sales. Toyota Motor April gained ground on GM and other automakers, its sales climbing as it recovered from the assembly-line disruptions caused by last year's Japanese earthquake.

Additionally, GM is facing tougher competition from "brands like Volkswagen and Hyundai who are pursuing — and meeting — aggressive sales targets," Krebs said.

Akerson acknowledged that global rivals will keep GM on its toes.

"Competition is intensifying everywhere we do business," Akerson said.

GM, which is recovering from its 2009 bankruptcy reorganization and government bailout, was the last of the domestic automakers to report financial results for the quarter.

Last week, Chrysler Group posted first-quarter net income of $473 million, up more than 300% from $116 million a year earlier. The company said the gains were driven primarily by a 40% rise in U.S. retail sales. It was the company's highest quarterly profit since it emerged from bankruptcy in 2009.

Ford earned $1.4 billion in the quarter, down 45% from a year earlier.

The federal government still owns about 32% of GM.

GM's shares slipped 50 cents to $22.43

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