General Motors expects to make broader adjustments to its European operations in the coming months after the loss-making unit again dragged down an otherwise strong quarterly financial performance.
The auto maker reports a first-quarter profit of $1 billion, or $0.60 per share, compared with $3.2 billion, or $1.77 per share, year-ago and marking its ninth consecutive profit since emerging from its 2009 U.S. bankruptcy.
The latest quarter included special items reducing earnings by $600 million, or $0.33 per share. A year ago, GM’s earnings in the period benefitted from special items pushing its profit up by $1.5 billion, or $0.82 per share.
First-quarter revenue grew 4.3% to $37.8 billion.
But the auto maker’s European unit, suffering from the effects of a still-recessionary economy, reported a third-consecutive quarterly loss, swinging $256 million into the red after a $5 million profit before taxes broke another string of losses.
Revenue in Europe declined 20.3% to $5.5 billion from $6.9 billion, as industry sales volume tightened amid continued weak consumer confidence, and GM’s share of the market dipped to 8.2% from 8.4% year-ago.
GM Chairman and CEO Dan Akerson says the auto maker’s restructuring of Europe to this point has yet to match production to demand.
“Before the next quarterly report, you’ll see more information coming out from the company” on that front, Akerson tells analysts during conference call today to discuss the financial results.
“We have engaged all parties at specific levels and are in dialogue all the time.”
GM officers do not speak to the potential for widely expected regional plant closings as a way to better match capacity with demand, but say the auto maker’s goal for reductions in manpower approach the 10% range it achieved as part of its North America turnaround over the last couple of years.
“You’re going to see headcount come out on a continual basis,” Chief Financial Officer Dan Amman says.
GM continues to achieve cost-cutting gains “behind the scenes” in Europe, he adds. “We’re making progress, (but) more to do.”
Elsewhere, the auto maker’s comeback from bankruptcy steamed ahead.
GM’s North American operations contributed pre-tax income of $1.7 billion from $1.3 billion year-ago, and a 9.3% uptick in sales to $24.2 billion from $22.1 billion. Production in the region grew 9.7% to 862,000 units from 786,000 and sales increased 2.8% to 703,000 units from 684,000.
GMNA also managed to raise vehicle prices and reduce incentives.
“It speaks to our balanced portfolio,” Akerson says. GM is selling a greater number of passenger cars since its bankruptcy, answering consumer demands for more fuel efficiency.
Still, the auto maker’s year-over-year market share fell to 16.7% from 18.3% in the U.S. and Amman blames an absence in the market of GM’s discontinued products and some nameplates nearing the end of their product cycles.
GM International Operations saw pretax earnings decline to $529 million from $586 million, but revenue grew 16.4% to $6.1 billion from $5.2 billion on sales of 928,000 units, up from 852,000 year ago. Market share inched upward to 9.4% from 9.3%.
China once again was the primary driver for GMIO, which also includes India and Eastern Europe.
“The key to China is to remain on the offensive,” says Akerson.
A week ago at the Beijing auto show, Akerson announced plans to increase GM’s dealership footprint in the country to 600 stores and introduce a new Cadillac every year through 2016. The auto maker believes half of all future luxury-vehicle sales growth worldwide will occur in China.
GM South America’s pretax profits fell to $83 million from $90 million in the same period year-ago and revenue remained flat at $3.9 billion.
Sales edged up to 249,000 units from 248,000, but market share fell to 18.4% from 18.8%.
Worldwide production rose 4.2% to 2.4 million units from 2.3 million year-ago, while sales increased 2.7% to 2.3 million units from 2.2 million. Global market share dipped slightly to 11.3% from 11.4% year-ago.
GM expects second-and third-quarter profits to mirror its first-quarter results, because its U.S. operation will see some production downtime as the auto maker retools for its next-generation fullsize pickups and SUVs.
The auto maker also says it expects to announce soon the first major benefit of its recently formed global alliance with French auto maker PSA Peugeot Citroen. Akerson dismisses reports GM wants to re-engage Japanese truck maker Isuzu in a significant partnership.
