GM first quarter earnings soar 33% to $2.6 billion – Detroit Free Press
GM CEO Mary Barra said Friday the automaker’s first quarter results show that the company’s strategy — focus on areas where it is making money and to pull back on areas where it is not — is making a difference.
The automaker’s profits soared 33% during the first three months of the year to $2.6 billion — a record for the company for the first quarter since it emerged from bankruptcy in 2009. It compares with the $1.93 billion GM earned during the same period a year ago.
The profits are notable since industry sales in North America are beginning to fall after seven years of sustained growth. GM’s earnings come one day after Ford announced its first-quarter profits fell 35% to $1.6 billion. It was the eighth straight quarter that GM beat Wall Street expectations.
GM’s bigger profits were driven by mostly by profits in North America and China. In Europe, a division that has dogged the automaker for years, GM lost $200 million.
Barra said Friday that GM’s profits will “immediately improve” after it completes the sale of its European division. GM agreed to sell its Opel and Vauxhall brands to PSA Groupe for $2.2 billion in March and expects to take a $4.5 billion charge when it completes the sale later this year.
“For GM, the sale is another step in our ongoing work to transform the company by strengthening our core business, investing resources in higher return opportunities, including personal mobility, and returning significant capital to our shareholders,” Barra said.
GM CFO Chuck Stevens said the sale of Opel will allow the automaker “to take significant structure out of the business” by reducing its corporate staff and engineers.
“We think that’s going to generate significant cost savings,” Stevens said.
The cost cutting tied to the sale of Opel is part of an ongoing process that began in 2014. GM expects it will save $6.5 billion by 2019 from those efforts.
During the first quarter, the automaker’s performance translated into earnings of $1.70 per share, easily beating Wall Street’s expectations. Analysts, on average, thought GM would earn $1.48 per share.
GM also said its global revenue increased 10.6% to $41.2 billion.
GM’s stock rose 10 cents, or 0.3%, on Friday to close at $34.64.
Brian Johnson, an analyst for Barclays, said investors continued to worry about expectations that industry sales will fall in the U.S. and GM’s profits will suffer as it deals with bloated inventory.
“We believe GM deserves to be better rewarded for overall strong results and execution,” Johnson said. “But unfortunately sometimes the prevailing market sentiment can be overly difficult to fight.”
GM’s record first-quarter results were mostly fueled by its profits in North America and China. Here is how the company performed in its main regions:
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