GM first-quarter profit soars to $3.2 billion
General Motors Co. had its most profitable quarter in more than a decade, posting $3.2 billion in earnings as it sold more cars in the U.S.
But on Wall Street the blockbuster results were not enough to counter growing worries among investors that a shaky economic recovery and high gas prices could dampen sales. GM shares fell $1.02, or 3%, to close Thursday at $32.02.
Analysts noted that a large share of the profits came from the sale of GM’s stakes in parts supplier Delphi Automotive and Ally Financial, which netted $1.9 billion for the automaker. Also, earlier in the quarter, GM leaned heavily on incentives to boost its market share.
Still, the earnings marked GM’s fifth straight profitable quarter.
“It’s definitely a very solid performance, particularly for a company that’s not two years out of bankruptcy,” said Bill Visnic, senior analyst with Edmunds.com. “GM seems to be improving its profitability on a reasonably consistent and sustainable trajectory, but there are still some mixed things here.”
A main concern is high gas prices, currently averaging around $4 a gallon nationwide, and their effect on GM’s portfolio of fuel-hungry trucks and SUVs. The company sold at least 54,000 more trucks than it did cars in the first quarter.
“A lot of their fuel efficiency talk is hinged on the Chevrolet Cruze,” Visnic said. “They’re better prepared than they have been, but it’s still far from ideal. If gas prices stay high, it could be a rough few months.”
This week, GM said it was recalling more than 154,000 Cruze cars to inspect steering shafts, mainly as a precaution, executives said. The vehicles, the company’s top-selling car in April, first sold in the U.S. and Canada in September.
GM reported torrid first-quarter sales of small cars and crossovers. The company sold more than 593,000 vehicles in the U.S., a 24% year-over-year gain. The company said its share of the U.S. market has expanded to 19%, up from 18.4% in the first quarter last year..
The company sold 2.2 million vehicles worldwide and may soon reclaim its position as the world’s largest automaker from Toyota, which is grappling with post-earthquake supply problems.
GM’s first-quarter revenue jumped 15%to $36.2 billion, up $4.7 billion from the same period in 2010. The company’s profit more than tripled from $865 million in the year-ago period.
The company said its core North American unit earned $2.9 billion before taxes and interest, more than double the $1.2 billion in the same three-month period in 2010.
GM recorded $480 million in first-quarter pre-tax profit from its international operations in Asia, down 47% from the same period last year. But the company held onto a 13.6% share of the still-growing Chinese market. Profit in South America slipped to $90 million from $265 million in the year-ago period.
Europe was again a sore spot, with a $400-million pre-tax loss, though it narrowed by $87 million from the same period last year.
In February, GM announced its first annual profit in six years. Its quarterly report follows a $2.6-billion profit announced by Ford last week. This week, Chrysler recorded its first profit — $116 million — since emerging from bankruptcy nearly two years ago.
GM’s report is good news for the U.S. government, which is mulling whether to sell more of its stake in the company later this month after its multibillion-dollar bailout in 2009.
“All in all, a good start to the year,” said chief executive Dan Akerson in a conference call with investors, adding that “the job is by no means done. We have a lot of work to do.”
Staff writer Jerry Hirsch contributed to this report.
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