By Mike Colias 

General Motors Co.'s first-quarter net income rose 34%, as strong sales of pickup trucks and SUVs in the U.S. continue to offset softening in the car market and troubles in regions like South America.

GM on Friday reported net income of $2.6 billion for the January-to-March period, a record for the quarter and up from $2 billion a year earlier.

The nation's largest auto maker by sales posted first-quarter operating profit of $1.70 per share, breezing past Wall Street expectations of $1.47 per share.

Revenue rose 11% to $41.2 billion, topping analysts' forecasts of $40.3 billion, as GM grew both sales and pricing on trucks and large sport utilities in North America, its most profitable vehicle lines.

GM continues to cash in on brisk demand for pickup trucks and SUVs, stoked by sustained low gas prices and steady economic growth. Profits from China remained steady as sales improved after a sluggish start to the year, while GM's sales mix in the world's largest car market tilted toward higher-priced SUVs, Buicks and Cadillacs.

The company continues to lose money in Europe, a region it will exit later this year upon the expected closure of the sale of its Opel division to French car maker Peugeot. GM's first-quarter loss in Europe was $206 million, versus just $6 million a year earlier, amid exchange-rate pressure stemming from Brexit.

Losses in South America widened to $115 million, from $67 million, as conditions in Brazil remain difficult despite GM's expectations for improved performance in the region this year.

GM continues to generate the bulk of its profits in North America, where it is commanding high prices for pickup trucks and big SUVs like the Chevrolet Suburban even as pricing erodes on passenger cars and smaller SUVs industrywide. GM's average prices in the U.S. slipped overall in the first quarter compared with a year ago, but the average price of a GM pickup truck -- its biggest profit generator -- edged up nearly $700, to $42,650, a spokesman said.

GM's North American operating profit rose 49% to $3.4 billion, also a record for the quarter. The company's operating profit margin in the region rose to 11.7%, from 8.7% a year earlier, partly from cost reductions.

GM benefitted from production increases in North America to build stocks head of planned factory down time later this year related to the launch of some redesigned models. Inventory on dealer lots swelled to a 98-day supply at the end of March, versus 71 days a year earlier.

Finance chief Chuck Stevens acknowledged that the build-ahead helped GM's bottom line during the quarter but said inventory will return to normal levels in the second half of the year. He also downplayed rising incentives by GM and other auto makers, saying the prices customers are paying haven't eroded.

"Clearly it's a more competitive market," Mr. Stevens told reporters at GM's headquarters Friday. "Transaction prices continue to remain strong."

GM said sales slipped in China during the quarter, but the company was able to offset the volume drop by selling a richer mix of SUVs and more Cadillac and Buick models, which carry higher-than-average prices. Equity income from its Chinese joint ventures totaled $504 million, versus $518 million a year earlier.

GM shares rose nearly 2% in premarket trading Friday.

The U.S. auto industry -- long a cyclical business -- has been riding an unprecedented seven-year run of rising sales since the end of the financial downturn, driven by tame gas prices, wage growth and pent-up demand from buyers who put off vehicle purchases amid economic uncertainty.

Still, GM shares have been stuck in neutral for much of that run. Despite two straight years of record profits, reinstating a common-stock dividend and billions in stock buybacks, the stock has struggled to stay above the $33 IPO price from 2010.

The lethargic stock price has drawn interest from activist shareholders including Greenlight Capital's David Einhorn, who has nominated a slate of three directors and is pushing a plan to divide GM's shares into two classes, separating its dividend from its operations. GM is urging shareholders to vote down the proposal at the annual meeting, likely in June, claiming it would harm the company's investment-grade credit rating.

Analysts typically point to concerns about a sales peak and whether GM can sustain strong profitability if U.S. auto sales turn sharply lower. Industry sales are slipping -- they're projected to decline for the fourth straight month in April -- though few analysts expect a steep decline in coming years.

Write to Mike Colias at Mike.Colias@wsj.com

 

(END) Dow Jones Newswires

April 28, 2017 08:43 ET (12:43 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more General Motors Charts.
General Motors (NYSE:GM)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more General Motors Charts.