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GM Records Q3 Profit Driven By New Costly Trucks

GM Records Q3 Profit Driven By New Costly Trucks
The costlier new full-size pickup trucks have driven General Motors Co. to report a profit of $2.5 billion in the third quarter which is a significant enhancement compared to the same quarter a year ago.
The Detroit automaker also reported a 25 per cent year-on-year increase in pre-tax earnings at $3.2 billion and a 41.7 per cent year-on-year increase in earnings per share at $1.87.
"Our third-quarter performance demonstrates our determination to manage risks and deliver strong business results while continuing to advance the future of mobility," GM CEO Mary Barra said in a statement released on Wednesday.
There was an 8 per cent jump in FM shares in pre-market trading.
So far this year, the third quarter is the first quarter that GM has been able to make an improvement in its reports despite increase in commodity costs because of import tariffs on steel and aluminum which forced the automaker to readjust its earnings outlook for the entire 2018 at the end of the second quarter. In the second quarter, GM noted a drop of 2.8 per cent in profits at $2.4 billion.
"Our disciplined approach to the U.S. market, combined with strength in China and further growth of GM Financial, drove a very strong quarter," GM CFO Divya Suryadevara said in the Wednesday statement. "We will continue to take actions to mitigate the headwinds including foreign currency volatility and commodity cost."
The company also increased its revenues in the third quarter from its North American business at about $2.8 billion, up from about $2.1 billion in the same period a year ago. In the same period of reporting, the Detroit automaker generated about $100 million in revenues from its international operations where a $500 million sale in China offset its losses in South America.
The world’s largest automaker was able to generate record equity income in the quarter from its operations in China despite the fact that the slowing demand for auto in China is hurting the industry all over. Many analysts also believe that auto demand in the US would also decline because of rising U.S. interest rates and because of sustained strength in industry sales for a number of tears.
A record average transaction price of vehicles of more than $36,000 was the primary factors behind GM’s North American performance. GM also reported that the number comes to an increase of about $800 per unit compared to the same period a year ago and was about $4,000 above industry average.
Those pricing gains are “absolutely sustainable,” said Suryadevara. “We had strong execution despite the challenges that we faced. Revenues up, profits up, margins up,” Suryadevara told reporters at the company’s Detroit headquarters.
During the third quarter, the loss for GM Cruise was $200 million.
The automaker forecast a full year profit in the range of $5.80 to $6.20 a share. The company however said that it expected to end the current year on the higher side of the estimate. its strong performance and favourable tax conditions were cited as the reason for this forecast by it.

Christopher J. Mitchell

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