General Motors net jumps to US$2.6 billionBusiness | 28 Apr 2017 8:37 pm
Rising sales of high-profit trucks and SUVs in the U.S. helped push General Motors to a first-quarter profit record as the company put up a US$2.6 billion in net income.
Sales in its most lucrative market were up even though the overall industry was down from January through March. That drove a 34 percent profit increase to US$1.70 per share, which shattered Wall Street estimates. Analysts polled by FactSet expected US$1.47 per share.
Revenue grew by 11 percent to US$41.2 billion, also beating estimates of US$40.6 billion.
GM made US$3.4 billion before taxes in North America, up almost 50 percent from US$1.1 billion a year ago. Chief Financial Officer Chuck Stevens attributed US$400 million of the increase to better prices, mainly on trucks and SUVs, and US$500 million in costs cuts.
GM's sales gained by just under 1 percent in the quarter while the whole industry was down 1.5 percent.
Stevens said he expects the pickup truck market to remain strong through the year largely because the average age of a U.S. pickup is 14 years, far above the overall fleet age of about 11.5 years. Also, gas prices should remain low, and any infrastructure spending that might come from President Donald Trump will increase construction and raise demand for new pickups, he said.
Pretax profits in China also helped GM's bottom line. Although they were down 3 percent, China still contributed US$504 million before taxes.
GM lost US$200 million in Europe for the quarter because of the falling British Pound due to the country's vote to exit the European Union. That loss won't be a drag next year because the company has a deal to sell unload its European Opel and Vauxhall brands to French carmaker PSA Group for roughly US$2.33 billion, retreating from the world's third-largest auto market after almost two decades of futile efforts to make money.
GM favors Trump's proposed corporate tax rate cut, but it won't have much of an effect on the company for the next five years. That's because GM still has US$34 billion worth of deferred tax assets and net operating losses largely from before bankruptcy that knock its corporate tax rate to under 10 percent, Stevens said. "We are in favor of tax reform. We think it's good for the economy, good for the consumer, good for businesses,'' he said.-AP