GM is motoring as profit jumps 34 pct on U.S. truck, SUV sales
DETROIT—People are buying more SUVs and trucks and paying General Motors handsomely for them, pushing the company’s first-quarter net income up 34 percent to a record $2.6 billion.
U.S. sales of large truck-based SUVs such as the Chevrolet Tahoe rose nearly 15 percent for the quarter to almost 54,000. Pickup truck and van sales were up 1 percent to 238,000, and sales of smaller SUVs rose 16 percent to nearly 219,000, according to GM. Analysts say GM makes $10,000 or more on each big SUV and pickup as people load them out with options. The average Tahoe, for instance, sold for more than $58,000 in the past quarter, up slightly from a year ago, according to Kelley Blue Book. Top-line versions with leather seating, sunroof and advanced safety electronics, sell for more than $65,000. That helped drive up GM’s average vehicle sale price to over $34,000, beating the industry average by $3,000, the company said.
“All of our facilities, full-size SUVs and the three truck plants, are running full-on, three shifts, to meet demand,” Chief Financial Officer Chuck Stevens said. GM’s earnings and revenue soundly beat Wall street expectations. Earnings of $1.70 per share shattered the $1.47 predicted by analysts polled by FactSet. Revenue was up 11 percent to $41.2 billion, exceeding estimates of $40.6 billion. Despite the strong performance, GM shares rose less than 1 percent to $34.71 in Friday afternoon trading. Investors, analysts say, are concerned that auto sales have peaked and so have the stocks. GM made $3.4 billion before taxes in North America, up almost 50 percent, or $1.1 billion, from a year ago. Stevens attributed $400 million of the increase to better prices on trucks and SUVs, and $500 million in cost cuts. GM’s U.S. sales rose just under 1 percent in the quarter while the whole industry was down 1.5 percent. Stevens expects the pickup market to remain strong through the year largely because the average age of a U.S. truck is 14 years, above the overall fleet age of about 11.5 years. Also, gas prices should remain low, and any infrastructure spending that comes from President Donald Trump will increase construction and raise pickup demand. GM lost $200 million in Europe for the quarter because of the falling British Pound due to the vote to exit the European Union. That loss won’t be a drag in the future because GM is selling its European Opel and Vauxhall brands to French carmaker PSA Group for roughly $2.33 billion (2.2 billion euros). GM expects to take a $4.5 billion charge when the sale closes, perhaps as early as the second quarter.