Truck, SUV sales drive up GM profit

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 truckbased SUVs such as the Chevrolet Tahoe rose nearly 15 percent for the quarter to almost 54,000. Pickup 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 with options.

The average Tahoe 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 seats, 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, fullsize 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.

GM shares rose 10 cents to close Friday at $34.64. Investors, analysts say, are concerned that auto sales have peaked and so have the stocks.

“It’s not fair, as we believe GM deserves to be better re-

warded for overall strong results and execution,” Barclays analyst Brian Johnson wrote in a note to investors. “Unfortunately sometimes the prevailing market sentiment can be overly difficult to fight.”

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, and gasoline prices are expected to remain low.

GM lost $200 million in Europe for the quarter because of the falling British pound related to the national 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.

GM expects to take a $4.5 billion charge when the sale closes, perhaps as early as the second quarter.

The company favors President Donald Trump’s proposed corporate tax rate cut, but its impact would be limited for the next five years. That’s because GM still has $34 billion worth of deferred tax assets and net operating losses to be used as writedowns. Those came mainly from before GM’s 2009 bankruptcy, and they reduce its corporate tax rate to under 10 percent, Stevens said.

Trump’s tax plan would lower the corporate rate from 35 percent to 15 percent. Most corporations pay closer to 20 percent, according to calculations by JPMorgan.

GM also made other news during Friday’s conference call with analysts:

Stevens indicated that GM is looking at white-collar

cost cuts as it simplifies its business after the exit from Europe. Simplification “will allow us to take significant structure out of the business, whether it’s corporate staff, whether it’s engineering staff,” he said during a conference call.

Chief Executive Officer Mary Barra shot down speculation that she may go to work in the Trump administration. “I’m 150 percent committed to General Motors,” she said, adding that she wants to lead GM in transforming transportation. “So that’s where my focus is and will be going forward,” Barra said.

GM also said Friday it is considering a return to Venezuela after announcing it was shuttering operations after a court-ordered seizure of its factory in the South American country.

The plant in the industrial city of Valencia was confiscated last week, along with GM’s bank accounts and other assets, as anti-government protesters clashed with security forces and pro-government

groups — a surprise decision that drew the U.S. into the country’s increasing political turmoil.

But President Nicolas Maduro’s administration has bent over backward to assure GM that it had no intention of expropriating the factory. The seizure of the plant, which hasn’t produced a car since 2015, arose from an almost 20-year-old lawsuit brought by a former GM dealership.

Stevens appeared to walk back the decision to leave Venezuela.

“We don’t necessarily want to exit the country, but certainly it’s not an environment that you can invest in or run a normal business at this point.”

Labor Minister Francisco Torrealba invited the company to reclaim the plant.

“The Venezuelan state is supporting, and wants to see, production at General Motors return to its maximum level in the hands of its legitimate owners,” Torrealba said in an interview on state TV this week.