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GM reports strong profits, lifting shares
NEW YORK, Nov 1, 2018 (BSS/AFP) – General Motors profits eclipsed
expectations in the latest quarter, despite the impact of tariffs and
slipping sales volume, as the company unveiled a plan on Wednesday to cut
jobs and reduce costs.
The company reported better-than-expected third-quarter earnings even as
it sold fewer vehicles in both North America and China.
Strong pricing in those markets allowed the company to offset the hit from
trade tariffs and the burden of the strong dollar in South American markets
and report profits that topped Wall Street forecasts by a wide margin.
Earnings for the quarter ending September 30 were $2.5 billion — up from
a loss of $3 billion in the year-ago period when results were hit by a one-
time accounting charge.
That translated into $1.87 per share, compared with Wall Street
expectations for $1.25 per share.
Revenues rose 6.4 percent to $35.8 billion.
“Our results demonstrate our commitments to execute our plans amid
industry headwinds,” Chief Executive Mary Barra said on a conference call
with analysts.
The strong sales come as the US and China are embroiled in a trade
dispute.
Executives said they were hopeful a deal could be negotiated and that
there had been no hit to GM-branded products in the market as a result of the
conflict.
GM said it experienced $400 million in higher costs due to US tariffs on
steel and aluminum but that strong pricing and cost cuts had offset the hit.
To keep a lid on costs, GM plans a “voluntary severance” program in North
America and 18,000 of the 50,000 salaried employees in the region are
eligible, a company spokesman said.
“Even with the positive progress we’ve made, we are taking proactive steps
to get ahead of the curve by accelerating our efforts to address overall
business performance. We are doing this while our company and economy are
strong,” a GM spokesman said.
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GM has no target for job cuts but if the process does not yield sufficient
savings, “we will evaluate the need to implement a subsequent involuntary
program,” the spokesman added.
– Cadillac strong in China –
The plan is the latest evidence of how GM has sought to reposition itself
to focus more on profitability and less on market share compared with years
past, a drive that has also led it to exit unprofitable markets while
steering funds to new technologies, including its Cruise autonomous driving
initiative.
GM sold fewer cars in North America than in the comparable period in the
prior year, falling nearly 10 percent to 833,712 units, but benefitted from a
higher pricing following a number of truck and sport utility vehicle
launches.
The Silverado pickup truck is currently selling more than 30 percent above
forecast, Barra said, adding that the company will have several new truck
trims in dealerships within two weeks.
Sales volumes also declined in China, falling by 14.9 percent to 835,934
vehicles compared with the prior year. But again, strong pricing boosted
results, permitting GM to score record equity profits from China during the
quarter.
GM has enjoyed especially strong sales of its Cadillac brand, which is up
20 percent amid robust demand in luxury and premium segments.
Executives said recent economic weakness has dented sales in smaller “Tier
3-5” Chinese markets.
These smaller cities “tend to be our less profitable part of the market,”
Chief Financial Officer Dhivya Surgadevara said. In contrast, larger markets
saw less of a drop and the luxury market “is actually up year over year.”
GM shares finished up 9.1 percent at $36.59.
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