General Motors posted a $2 billion third-quarter profit Wednesday, driven by an accelerating turnaround in North America as it rushes to complete an initial public offering of stock set for next week. The quarterly profit was the largest for GM since it emerged from bankruptcy in July 2009 and provides the last piece of financial data for investors evaluating the automaker’s $13 billion IPO.
GM said it expected to post solidly profitable results for 2010, its first full-year profit since 2004.
A large part of that profit reflects lower operating costs and reduced sales incentives in GM’s U.S. operations, which had posted deep losses in the run-up to its 2009 bankruptcy funded by the Obama administration.
The automaker reported increased cash earnings in North America for a third consecutive quarter, with its international results flat to up slightly and a bigger loss in Europe.
“We know we have much more work to do,” Chief Executive Dan Akerson said in a conference call. “We still need to fix Europe. We continue to be vigilant in reducing cost in the enterprise, and we have just started doing a better job in marketing our brands to consumers.”
The automaker’s IPO will include common and preferred shares and will allow the U.S. Treasury to reduce its stake in GM from about 61 percent to near 43 percent.
GM executives have started an investor road show to support the IPO plans and Akerson and Chief Financial Officer Chris Liddell did not take questions after a presentation on third-quarter results.
The pitch to investors continuing this week aims to sell a GM that has slashed costs in North America, has a plan to make Europe profitable and retains more exposure than any other automaker to the fast-growth, developing auto markets in Brazil, Russia, India and China.
Akerson replaced Ed Whitacre as CEO on Sept. 1 and will add the chairman role by year end. His appearance on the GM earnings conference call marked a departure from practice under Whitacre, who had a reputation as a hands-off manager.
In North America, GM’s earnings gain in the third quarter was driven mainly by a reduction in sales incentives and discounts to consumers on the back of better-selling new vehicles like the Chevrolet Equinox and GMC Terrain.
The automaker also reported an increase in truck production that supported the results since trucks like the Chevy Silverado carry higher prices and richer margins than smaller vehicles.
GM expects to build more cars in the fourth quarter with the introduction of the Chevrolet Cruze compact, a new car that represents the automaker’s most serious effort to date to compete against the Honda Civic and Toyota Corolla on features and fuel economy.
GM’s profit met the expected range it outlined last week when it released details of its plans for an IPO. The automaker reported earnings per share of $1.20 for the quarter.
GM posted revenue of $34.1 billion in the third quarter. GM emerged from its government-funded bankruptcy in July 2009, making year-ago comparisons less relevant.
GM’s profit topped U.S. No. 2 rival Ford Motor Co’s $1.7 billion third-quarter profit, and Chrysler’s $84 million net loss for the quarter.
GM expects earnings before interest and tax to be significantly lower in the fourth quarter than it was through the first three quarters due to vehicle introduction costs and spending for future products among other expenses.
The automaker expects to take a $700 million noncash charge in the fourth quarter in connection with a plan to acquire the U.S. Treasury’s holdings of GM preferred shares.
The U.S. automaker reported losses totaling about $88 billion from 2005 to 2009, when it fell into bankruptcy, as losses mounted in its home market.
Show me the data !
The last several BS propaganda press released had major flaws in the real facts !
GM has received massing government special breaks in addition to the initial TARP bailout along with new fraudulent accounting rules to re assign old debt and front load new revenue instead of the old several years balance.
The government will assume cleanup cost for its old EPA sites.
GM Resumes Political Giving
http://online.wsj.com/article/SB10001424052748704129204575506352139305206.html
“If GM is valued in that $60 billion to $70 billion range, that gets the taxpayer paid back. But the question is, is that achievable for a company that is a year out of bankruptcy…?” said Brad Coulter, director of O’Keefe and Associates.
081910
GM reported earnings of $1.3 billion in the second quarter (its best showing since Q2 2004), but how impressive is it really? And have things really turned around?
My answer to those questions would be: not very and probably not.
For one thing, profits weren’t driven by much-improved vehicle sales but a $3 billion reduction in interest expense relative to the same quarter a year ago, thanks to the debt that was wiped out. Worldwide vehicle sales were up a mere 11% from Q2 2009 (a quarter that showed a loss of nearly $13 billion) and have only gotten back up to the level generated in Q3 2008.
What’s more, the failure to acknowledge the Opel situation hints to a write-down coming in future quarters. Despite some $5 billion in restructuring costs at Opel remaining as yet unfunded, GM has chosen to not deal with the situation in the quarters leading up to the IPO. Add to that huge pension liabilities that simply can’t be funded with cash generated from operations and accounting that appears “hinky,” to say the least, and I would say that even with all the debt that’s been wiped away, GM is still a sick company.
Give me five or six straight quarters without a single “one-time” write-down in the $20 billion region, and I might be able concede that things have started to turn around at GM.
Chris Wood
Casey Research, LLC