GM ekes out Q1 gain despite switch recall – USA TODAY
Correction: An earlier version of this report misstated earnings results for General Motors. The company saw a net income gain.
General Motors said Thursday that it eked out a $125 million gain, or about 6 cents a share, in the first quarter despite a $1.3 billion charge for the costs of its massive ignition-switch recall.
The profit avoided breaking GM’s string of profitable quarters since 2009 and its bankruptcy reorganization. The quarterly result, however, was a steep drop from the net income of $865 million, or 58 cents a share, in the same period last year.
The giant automaker’s core business appeared to be largely unscathed by the recall crisis. Without one-time losses, it says it made $590 million in operating income. Revenue was $37.4 billion, up from $36.9 billion last year.
“It was an understatement to say the first quarter was challenging for General Motors,” CEO Mary Barra said said in a conference call with analysts. “Nevertheless, the company remained profitable, and I’m very proud with how the team kept the focus on the customer.”
Investors initially reacted positively to the report, pushing with shares up, but GM closed down 22 cents, or 0.4%, at $34.17.
Analysts warned the the company still faces challenges beyond the recalls, including losses and restructuring costs in Europe and political and currency risks in South America — where it also took a large charge in the quarter.
“There are still uncertainties in the road ahead for GM. We continue to expect a gradual recovery in Europe, South America continues to exhibit … risk, and the U.S. large pickup segment remains volatile,” wrote Brian Johnson of Barclays in a note to investors.
Most analysts expect the automaker to eventually pay several billion dollars to settle recall claims and pay government fines, although those expenses are not expected to deliver irreparable damage to the company’s finances.
Despite the recall, the company posted a $557 million profit in North America, where operating margin would have been about 8% without recall costs.
In Europe, where GM has not made a profit since 1999, the company’s loss widened from $152 million to $284 million as GM incurred restructuring costs associated with a plant closing in Germany.
In GM’s International Operations division, which includes Asia and Australia, pre-tax profits fell 47% to $252 million. But GM earned $598 million before taxes in China, up 9% from a year earlier.
In South America, however, the automaker lost $156 million before taxes, not including a $419 million charge associated with the devaluation of Venezuela’s currency, the bolivar.
Worldwide, GM’s market share fell from 11.3% a year earlier to 11.1% in the first quarter of 2014. In the U.S., its market share slipped from 17.7% to 17%.
Contributing: Nathan Bomey, Detroit Free Press