GM Earnings Climb 24% in 3rd Quarter : But Modernization of Plants and Sales Incentives Trim Net

General Motors said Tuesday that its third-quarter profits rose 24% to $516.5 million, but analysts said that was below expectations because of costly plant modernization and sales incentives during the period. The year-ago quarter’s profits were hurt by the effects of a United Auto Workers strike.

GM acknowledged that the earnings--which came on record sales of $22.5 billion--were adversely affected by the expense of its 7.7% discount financing program, offered from mid-August to early October, that was designed to clear out unsold 1985 models.

The company also said its profits were hurt by heavy capital investments in new product programs and plant modernization efforts, higher labor and material costs, the firm’s efforts to reorganize its North American car and truck operations and its program to integrate its newly acquired Electronic Data Systems computer services subsidiary into GM’s structure.

Record Unit Sales

Analysts had been expecting GM to report earnings of about $555 million for the quarter, especially since the company racked up record worldwide vehicle sales of 2.15 million units for the three months ended Sept. 30, up 20.1% from last year’s third quarter, when the UAW went on strike against selected GM plants around the country.

As a result of the lower-than-expected third-quarter earnings, Gary Glaser, automotive analyst with First Boston in New York, said he is reducing his estimate for GM’s fourth-quarter profits to about $875 million and full-year earnings to about $3.45 billion.

For the first nine months, GM posted earnings of $2.75 billion, down 24.5% from last year’s record $3.639 billion. Sales for the first three quarters, however, hit a record $71.7 billion this year.

Ford, Chrysler Reports Expected

Ford and Chrysler are expected to report their third-quarter earnings within the next few days, and some analysts believe that Chrysler may report higher profits than the much-larger Ford.

Glaser predicted that Chrysler will report earnings of $290 million for the quarter, which ended before the ongoing strikes against it by the UAW in the United States and Canada began. By contrast, Glaser said Ford should post profits of about $250 million for the period. Last year, Chrysler posted third-quarter earnings of $261.6 million, while Ford reported record third-quarter profits of $379.7 million.

GM’s earnings would have been much lower without the use of huge tax benefits and favorable foreign currency translations. GM’s earnings were helped by the use of about $172 million of tax credits in the third quarter, while currency translations added another $120 million to its profits, Glaser estimated.

Meanwhile, General Motors Acceptance Corp., GM’s financing arm, reported record earnings of $266.2 million.