GM lands good sales on back of its pick-ups
RISING sales of high-profit trucks and SUVS in the US helped push General Motors to a first-quarter profit record as the company put up $2.6 billion in net income.
The company’s 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 $1.70 a share, which shattered Wall Street estimates. Analysts polled by Factset expected $1.47 a share.
Revenue rose 11 percent to $41.2bn, also beating estimates of $40.6bn.
GM made $3.4bn before taxes in North America, up almost 50 percent from $1.1bn a year ago. Chief financial officer Chuck Stevens attributed $400 million of the increase to better prices, mainly on trucks and SUVS, and $500 million in costs cuts.
GM’S sales rose just under 1 percent in the quarter while the whole industry was down 1.5 percent.
Spending
Stevens said he expected the pick-up truck market to remain strong through the year largely because the average age of a US pick-up is 14 years, far above the overall fleet age of about 11.5 years. Also, fuel prices should remain low, and any infrastructure spending that might come from President Donald Trump will increase construction and raise demand for new pick-ups, he said.
Pretax profits in China also helped GM’S bottom line.
Although they were down 3 percent, China still contributed $504m before taxes.
GM lost $200m in Europe for the quarter because of the falling British pound due to the country’s vote to leave the EU.
That loss won’t be a drag next year because the company has a deal to unload its European Opel and Vauxhall brands to French car-maker PSA Group for roughly $2.33bn, retreating from the world’s third-largest vehicle market after almost two decades of futile efforts to make money.
GM favours 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 $34bn 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 favour of tax reform.
“We think it’s good for the economy, good for the consumer, good for businesses,” he said. – AP