General Motors profit jumps on pricier pickups, SUVs
Carmaker posts 10.2% operating margin in North America, sidesteps troubles in China
General Motors Co.’s third-quarter operating profit jumped 25%, as the automaker sold more pricey trucks and sport-utility vehicles in its home U.S. market while sidestepping the troubles in China that have tripped up its Detroit rivals.
GM said Wednesday its operating profit for the July-to-September period—stripping out onetime factors—totalled $3.2 billion (U.S.), a record for the quarter.
The company commanded higher prices in its two largest markets, China and the U.S., despite significant sales declines in each country.
Pre-tax earnings per share, adjusted for one-time items, was $1.87 a share, easily surpassing analysts’ expectations of $1.25 a share. GM shares surged more than 9% in premarket trading.
Net income was $2.5 billion. That compares with a loss of about $3 billion a year earlier, driven mostly by a hit from deferred
tax assets that GM relinquished when it sold its European Opel AG unit in August 2017.
Revenue rose about 6%, to $35.8 billion, slightly higher than analysts’ forecasts. GM reiterated its full-year operating profit outlook of $5.80-$6.20 per share, saying it expects to be at the top end of that range.
The nation’s biggest car company by sales is straining to preserve healthy profit margins
as top two markets—China and the U.S.—come under pressure.
GM’s sales in China in the third quarter fell 15%, while U.S. sales dropped 11% in the same period. But in both countries, the company has managed to shift its sales mix to more-lucrative vehicles.
In the U.S., GM dialed back spending on consumer discounts, which helped protect its bottom line but dented sales. It sold fewer lower-margin passenger cars, while selling a richer mix of large SUVs such as the Chevrolet Tahoe, helping boost the average selling price to around $36,000, a record for the quarter.
“We had a ton of pricing discipline this quarter,” GM finance chief Dhivya Suryadevara told reporters Wednesday.
Operating profit in North America surged 37% to $2.8 billion. GM said its operating margin in the region was 10.2%, despite the drop in sales volume and pressure from tariff-related commodity cost increases.
In China, GM’s Cadillac luxury brand posted record sales during the quarter.
That helped the company combat a broader decline in new-vehicle demand in the country, the Chinese car market’s first major slowdown in years. GM’s third-quarter income from joint ventures in China rose 6%, to $485 million.
Despite the headwinds in China, the world’s largest car market remains a key source of profit for GM, which vies with Volkswagen AG as the top-selling automaker in the country.
GM is on track to bring in about $2 billion in operating profit from China this year, while Ford Motor Co. and Fiat Chrysler Automobiles NV have swung to losses there.
Still, collectively the results from the three Detroit automakers show their growing reliance on truck and SUV sales in North America to fuel the bottom line, as it gets tougher to do business in other key markets overseas.
Fiat Chrysler on Tuesday posted record operating profit in North America for the third quarter, while performance in Europe and China worsened. Ford posted similar lopsided results last week, with North America driving the bulk of its profit during the period as the company’s international operations continued to weaken.
Analysts estimate sales of pickup trucks and large SUVs in the U.S. account for 50% to as much as 80% of the three Detroit companies’ profits.