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General Motors earnings down 32 percent but better than expected

Greg Gardner, Detroit Free Press on

Published in Automotive News

DETROIT -- General Motors earned $2.5 billion before taxes in the third quarter, down 32 percent from its $3.7 billion year-earlier pre-tax earnings but better than most Wall Street analysts were expecting.

On a net-income basis, the automaker lost $3 billion, but that reflected $5.4 billion in accounting charges for the sale of its Opel and Vauxhall European brands to PSA Group.

"We are managing the business with discipline to drive strong performance today, while investing in higher-return opportunities, including those that will shape the future of transportation," said Chairman and CEO Mary Barra, in a release.

GM warned in July that its profits might decline in the second half of 2017 as it cut production of slower-selling cars and retooled several plants for production of new crossover and SUV models.

Even so, the results for the July-to-September period translated to $1.32 per share, beating Wall Street's expectations. Analysts, on average, were forecasting between $1.11 and $1.15 per share.

Investors have taken a brighter look at GM in recent months, largely because of a perception the company is moving quickly in developing autonomous mobility technology. In early 2016, the largest U.S. automaker invested $500 million in ride-hailing business Lyft and acquired Cruise Automation, a San Francisco-based company focused on autonomous vehicle technology.

GM shares have risen about 30 percent so far this year. Investors responded to Tuesday's results by driving the price up 2.9 percent to a close of $46.48.

The automaker's automotive sales fell 16.6 percent in the quarter to $30.5 billion from $36.5 billion a year earlier. That reflects GM recent decisions to leave several markets, including Europe, India and South Africa. GM also has wound down production in Australia, ending it completely on Oct. 20

The bulk of GM's third-quarter profit once again came in North America, where its U.S. sales rebounded in August and September after falling in July.

GM and other automakers are expecting U.S. sales to slow gradually, and GM continues to adjust to consumers' shift from passenger cars to trucks, SUVs and crossovers. It has cut production at plants in Michigan, Missouri and Ohio and recently said it would slow production at its Detroit-Hamtramck factory due to weak sales of the sedans built there. Workers there also will have an extended Christmas break starting Nov. 13.

Earlier this month, about 2,800 workers at a GM assembly plant in Ingersoll, Ontario, returned to work after a one-month strike over GM's decision to move production of the GMC Terrain to Mexico. That left the plant with just one model, the Chevrolet Equinox. The strike ended when GM told members of Unifor, the Canadian auto union, it was prepared to close the plant permanently.

Any financial impact from the strike will be reflected in fourth-quarter earnings.

Now that GM Europe is off its books, GM made money in all other regions, including $500 million from its joint ventures in China and $100 million in South America.

As for the outlook over the remainder of 2017, Chief Financial Officer Chuck Stevens said there would be fewer production cuts, but overall output in North America would be lower than the comparable period of 2016.

"Our full-year 2017 results will be in line with the record results that we posted in 2016," Stevens said.

(c)2017 Detroit Free Press

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