By Jeff Bennett
General Motors Co. said first-quarter results fell 82% but far
exceeded Wall Street expectations, as the push to sell cars and
trucks at higher prices in North America helped the auto maker
offset the cost of model recalls.
The company reported a first-quarter profit of $213 million,
before the payout of preferred dividends, compared with $1.18
billion a year earlier. It was the worst quarterly performance
since the company exited bankruptcy.
However, GM posted adjusted earnings of 29 cents a share, which
included special items totaling 23 cents, beating analyst
expectations of 4 cents a share, according to analysts polled by
Thomson Reuters.
Revenue rose to $37.4 billion from $36.9 billion.
"The recall campaign charges in the first quarter overshadowed
the headline results," said GM Chief Financial Officer Chuck
Stevens.
GM said it has spent $700 million on replacement switches and
cylinders and $600 million on other recall items. In all, the
recall lowered GM's results by 48 cents a share during the
quarter.
"When you look underneath that, we had a strong performance
across the board. North America was up about $500 million
year-over-year excluding the recall charge. China was strong and we
are seeing some real progress in Europe."
The results suggest the auto maker's strategy to sell its newest
models at higher prices and hold the line on incentives despite
giving up some market share may be working. The refusal by GM's
executive team to bend on pricing in the U.S. pushed the average
vehicle sales price across the entire vehicle portfolio to $32,794,
up $2,000 over last year.
Pickup trucks alone sold for $5,000 more than they did a year
earlier. Much of those sales were consumers buying more high-end
trucks.
"Our crew cab sales have gone from 58% to 63% and within the
trucks themselves, we are selling a higher penetration of higher
level trims," Mr. Stevens said.
Despite the sales increase, the auto maker's U.S. market share
fell to 17% from 17.7% a year earlier. Its world-wide share slipped
to 11.1%
In North America, operating profit fell to $557 million,
reflecting the $1.3 billion charge the company took to cover the
costs associated with recalling more than 7 million cars
world-wide, 2.6 million of which were connected to faulty ignition
switches.
The company is buying parts from supplier Delphi Automotive LLC,
which is operating one production line on multiple shifts. Two
additional assembly lines will be added during the summer, allowing
the auto maker to replace switches and cylinders on the majority of
recall vehicles by October. A GM spokesman said it is bearing the
brunt of the costs associated the replacement switch production but
he declined to say how much it would cost.
Mr. Stevens said it was too early to tell if the company will
take more recall related charges throughout the rest of the
year.
"The charges we have taken in the first quarter are based on
what we know today," Mr. Stevens said. "As issues come up we will
deal with them aggressively. It's hard to predict and too early to
tell."
Elsewhere in the company, GM's South America loss widened to
$156 million from $38 million a year earlier due to lower sales and
currency changes.
The problematic European division also reported a larger loss of
$284 million compared with $152 million a year earlier. The
European loss included $200 million in restructuring charges.
"Excluding the charges the losses would have been closer to $100
million versus $200 million in the first quarter of last year," Mr.
Stevens said. "Fundamental core improvement in operations are being
led by product there. Revenue was up significantly."
The results suggest GM could be ahead of its previous prediction
and break-even in Europe before 2016.
Profit at the international operations declined to $252 million
in the first quarter from $472 million a year earlier. China's
operating profit, however, rose to $605 million compared with $550
million.
Write to Jeff Bennett at jeff.bennett@wsj.com
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