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GM first-quarter profits dip on losses in Europe, South America

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General Motors Co. reported lower first-quarter profits Thursday as it struggled with the continuing economic slump in Europe and a dip in earnings in North America.

Profit for the nation’s largest automaker profit fell 14% to $865 million compared with the same period a year earlier. Revenue for the quarter dipped to $36.9 billion from $37.8 billion.

GM’s operating profit in North America slid to $1.4 billion from $1.6 billion in the same period a year earlier.

Although it gained market share in the U.S., higher spending on discounts and sales incentives hurt the automaker’s profits, said Jesse Toprak, an analyst with auto price information company TrueCar.com.

Through the first four months of this year, GM’s U.S. sales have risen almost 10% compared with the same period a year ago, above the industry’s 7% pace, according to Autodata Corp.GM’s share of the market has grown to 18.1%, from 17.7%.

"We expect a stable market share of around 18% from GM with a more favorable earnings outlook for the second half of 2013, thanks particularly to the expected recovery in the full-size truck segment,” Toprak said. “Europe continues to be a drain on otherwise profitable North American operations.”

GM is about to launch a new generation of its Chevrolet Silverado and GMC Sierra pickup trucks.The big trucks are typically among the most profitable vehicles in the automaker’s portfolio.The new models come to market at a time with trucks are the hottest segment of auto sales, helped by a rebound in housing and construction.

GM officials were upbeat about the company’s prospects, although they did say they expected higher costs associated with the launch of the new trucks and other vehicles later this year.

“The year is off to a solid start as we increased our global share with strong new products that are attracting customers around the world,” said Dan Akerson, GM’s chief executive.

Losses in Europe dipped to $175 million for the quarter, from $294 million in the same period a year earlier. GM lost almost $1.8 billion in the region last year, but executives said the company’s European operations are starting to improve.GM has said it believes it won’t get its business there back to a break-even level until mid-decade.

“We actually gained a bit of market share in Europe during the quarter,” said Dan Ammann, GM’s chief financial officer, but he added he doesn’t see signs that the region’s economy will turn around any time soon.

“It is too soon to call the bottom in Europe,” he said. “When you have 20%-plus unemployment in a number of countries, it is still far too soon.”

European new-car sales fell 10% during the first quarter of this year, to 2.9 million, compared with 3.3 million a year earlier, the European automakers association ACEA reported last month.

GM South American operations slid into a loss of $38 million during the quarter compared with a profit of $153 million in the same period a year earlier.

The rest of GM's international operations, mostly China, saw operating profit dip to $495 million in the first quarter, from $521 million a year earlier.

“We had strength in China offsetting some of the business in other markets,” Ammann said, primarily slowing in Australia and India.

As of April 1, the U.S. government still owned 16.4% of the GM.The Treasury Department took shares in the company as part of GM’s bankruptcy restructuring and federal bailout in 2009.  The government has trimmed its holdings by about 50% since then.

Earlier this week, Chrysler Group said that its first-quarter profit fell 65% to $166 million. Higher expenses on launch models and slower business in Europe and South America hurt the automaker’s earnings.

Last week, Ford Motor Co. said its first-quarter profit rose more than 15%, helped by record earnings in North America and a strong performance by its auto-financing arm.

Tesla Motors, the fourth U.S. automaker, is expected to report its first profit when it announces its financial results Wednesday.

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Copyright © 2014, Los Angeles Times
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