GM has reported a profit of US$62m for the first quarter, its second straight quarter in the black. The company posted record global sales, and improved automotive profitability and operating cash flow for the quarter.
There was a loss on its North American operations, but there were signs of improved performance in GM’s domestic market.
However, some analysts were disappointed with GM’s results. Excluding one-time items, the company said it earned 17 cents per share. On that basis, analysts on average had expected 87 cents a share, according to Reuters Estimates.
GM reported net income of US$62m, or US$0.11 per diluted share, including special items, in the first quarter of 2007, compared with net income of US$602m, or $1.06 per diluted share, in the year-ago quarter.
GM said that the decline in reported GM earnings is ‘more than accounted for by losses in the residential mortgage business of GMAC Financial Services (GMAC), driven by continued weakness in the U.S. nonprime mortgage sector’.
In addition, last year’s results included a one-time after tax gain of US$395m due to the sale of a portion of GM’s equity ownership position in Suzuki Motors.
“The first quarter of 2007 marked another quarter of continued progress in GM’s global automotive operations. We were able to expand vehicle sales and improve automotive profitability based on the progress in our turnaround initiatives in North America and Europe and our expansion strategy for key growth markets like China, Russia and South America,” said GM Chairman and Chief Executive Officer, Rick Wagoner. “We continue to see progress on the automotive bottom line as we implement the strategies laid out two years ago.”
Net income from GM’s global automotive operations totalled US$304m on an adjusted basis, in the first quarter of 2007 (reported net income of US$272m), compared to US$40m in the year-ago quarter (reported net income of US$295m).
GM sold an all-time first quarter record 2.26m cars and trucks in the first quarter of 2007, up 3% or 67,000 units, over the first quarter of 2006. Sales in the GM Asia Pacific (GMAP) region grew more than 20%; GM Latin America, Africa and Middle East (GMLAAM) grew 17%, and GM Europe (GME) grew 6%.
However, GM North America (GMNA) posted an adjusted loss of US$85m in the first quarter of 2007 (reported net loss of US$46m). That was still an improvement of US$166m compared to an adjusted net loss of US$251m in the year-ago quarter (reported net loss of US$292m).
The GMNA improvement in the first quarter was mostly attributable to large structural cost savings in health care and manufacturing related expenses, GM said. The company also said that GMNA ‘enjoyed positive product mix related to the strong acceptance of new launch products as well as GM’s continued strategy to reduce its daily-rental fleet business’.
GMNA was able to improve its year-over-year net income, despite a significant production reduction of 192,000 units. The volume decline ‘reflected the disciplined implementation of the company’s sales and marketing strategy, including reducing dealer inventories in the U.S. and Canada by 111,000 units as compared to year-ago levels, and reducing deliveries to daily rental companies in the U.S. and Canada by 69,000 units. Retail sales were up slightly in the U.S. for the quarter, despite challenging market conditions.’
“This quarter’s results again demonstrate progress in the implementation of our North America turnaround plan. They reflect major cost reductions once again, which more than offset lower volume — a function of the disciplined implementation of our product-based sales and marketing strategy,” Wagoner said. “And, our newest products such as the GMC Acadia and Chevrolet Silverado have been well accepted by consumers, which gives us confidence that the most important element of our North America turnaround — product excellence — is well on track.”