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General Motors made $1 billion in the first quarter, beating analysts’ expectations before being dragged down by a special accounting-related $590-million charge in struggling Europe.
“This management team is not getting ahead of ourselves,” CEO Dan Akerson told financial analysts today on a conference call. “We’re not immune to the industry issues like recession or overcapacity in Europe or competition that’s intensifying everywhere we do business. Every day we keep our teams focused on these cold, hard facts.”
A $1.7-billion profit in North America, up 35%, powered the earnings – good news for next year’s profit-sharing payout for UAW workers. But GM warned it didn’t expect to repeat last spring and summer’s uptick in North American profits due to scheduled plant downtime ahead of the 2013 launch of the new Chevy Silverado.
The overall profit was GM’s ninth straight, adding to its longest string of quarters in the black since early last decade. The automaker is seeking to build on restructuring that followed $82 billion in losses in the four years before its 2009 bankruptcy. But the European region has remained a persistent problem.
GM's net income compares with a $3.2-billion profit a year earlier, which was boosted by a $1.6-billion special gain related to the sale of a Delphi ownership stake.
Not including special items, interest and taxes, GM made $2.2 billion last quarter, 10% higher than the first quarter of 2011. That translated to a profit margin of 5.8%, up from 5.6% a year earlier and 2.9% in the fourth quarter. First-quarter revenue reached $37.8 billion, up 4.4%.
Before the special charge, which CFO Dan Ammann attributed to “accounting weirdness” left over from the bankruptcy exit, first-quarter earnings were worth 93 cents per share. Analysts had predicted a gain of 85 cents per share, according to an average compiled by Thomson One Analytics. Still, the stock had fallen 2.4% to close at $22.37.
GM's South American region returned to the black last quarter, as GM began efforts to launch nine new products there this year. GM International Operations, a sales region that includes China, made $529 million, down 9.7%.
The automaker’s woes continued in Europe last quarter with a $256-million loss, compared with a $5-million gain a year earlier. The loss, off a 19.7% decline in revenue, was smaller than in the fourth quarter.
Last year’s annual loss in Europe marked GM’s 12th straight. In 2009, GM’s board backed out on a bankruptcy-era plan to sell the operations, only to see a recovery plan fail to bring profits last year amid European economic turmoil. Vice Chairman Steve Girsky is now leading several senior officers in developing yet another turnaround plan. So far GM has announced an agreement to acquire 7% of Peugeot Citroen, in hopes of jointly developing vehicles and combining parts purchasing efforts.
That alliance shouldn’t impact earnings until 2015 or 2016, Ammann said. He declined to give further details of the European restructuring plan. But both Ammann and Akerson hinted at buyouts for workers who are near retirement, potentially to be announced in the next three months.
“We’re making progress week-to-week on the cost front," Ammann said. “Not everything will come with some big announcement.”
As the European region saps profits, GM’s stock continues to linger well below its initial price of $33 in November 2010, prolonging the U.S. government’s wait to sell more shares.
Selling the shares now would result in deeper losses than taxpayers incurred on the $33-per-share initial offering. To break even on its $49.5-billion investment in GM, the government must sell the rest of its shares at about $53 each, although the Obama administration has signaled that it’s willing to take some loss.
Not including special charges, interest and taxes, GM’s first-quarter profit -- $2.2 billion – nearly matched Ford’s $2.3-billion pretax profit and beat Chrysler’s operating profit of $740 million.