GM profit triples, says on track for stronger year

09:08 | 06/05/2011
General Motors reported Thursday first-quarter profit more than tripled from a year ago to $3.15 billion on asset sales and strong demand for its new fuel-efficient vehicles even as its overseas operations flagged.

The biggest US automaker said it was solidly on the profit track after a massive government bailout that allowed it to emerge from bankruptcy reorganization in 2009.

"We are on plan," GM chairman and chief executive Dan Akerson said in a statement.

"GM has delivered five consecutive profitable quarters, thanks to strong customer demand for our new fuel-efficient vehicles and a competitive cost structure that allows us to leverage our strong brands around the world and focus on driving profitable automotive growth."

Global market share is up and GM is "well positioned" to take advantage of industry growth and meet customer demands, Akerson said in a conference call.

However, the company is still working to restructure its troubled European operations and refresh its global product offerings.

"I would describe the first quarter as steady progress but with more work to do," Akerson told analysts and reporters.

While the company has made "good progress strengthening our balance sheet," it still has "a lot of work to do to realize our scale and leverage the full potential of our brands," he said.

Revenue surged 15 percent to $36.2 billion in the January-March period, up $4.7 billion from a year earlier and beating market expectations.

The $3.15 billion quarterly profit included a gain of $1.6 billion from the company's sale of its stake in Delphi Automotive, its former auto-parts arm, and a $300 million gain from the sale of Ally financial.

Earnings per share excluding special items were 95 cents, topping the average analyst forecast of 93 cents.

Operating income fell to $949 million from $1.2 billion in the first quarter of last year due to rising commodity costs and weaker results in Europe, Asia and Latin America.

For North America, the automaker reported operating profit of $2.9 billion, more than double from a year ago.

"A decent quarter but short of the upside we were looking for," Citigroup said in an analyst note, adding that GM's Asian performance was "a tad light."

Deutsche Bank called the results "just OK" and noted that GM's "relative underperformance" on an operating basis was "driven by lighter than anticipated results" in North America.

However, the bank noted that it anticipates that "GM's results will improve during the course of 2011 and beyond as a result of improving demand, recent price increases at GM, Toyota and Ford and little apparent impact from the disaster in Japan.

GM said it expected its North America earnings to improve for the remainder of the year compared with the first quarter "as better pricing and improved fixed cost should more than offset commodity cost increases and unfavorable mix."

GM said its European division broke even on an adjusted basis -- "a significant milestone" -- and predicted breakeven results for the entire year.

For all of 2011, GM said it expects "results will show solid improvement over 2010."

The company reiterated it expected the Japan earthquake disaster would have no serious impact on full-year results.

The positive earnings report came as the government looks to sell its remaining stake in GM after a politically controversial $49.5 billion rescue from the Treasury.

Marking its successful emergence from bankruptcy reorganization in July 2009, GM raised $23.1 billion last November in the largest public offering in history.

The government would need to sell its roughly 500 million shares for $53 dollars each in order to break even. GM shares closed down 3.1 percent at $32.02.

On Tuesday, GM reported US sales were up 26 percent in April from a year ago, powered by fuel-efficient passenger cars and crossovers.

The biggest US automaker said that gasoline prices, averaging almost $4 per gallon (3.8 liters), were prompting consumers to trade in larger vehicles for smaller, more fuel-efficient ones.


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