UPDATED: 4/24/14 4:17 pm ET -- adds closing stock price
DETROIT -- Surging transaction prices on trucks helped General Motors offset heavy costs from safety recalls and eke out a small profit in the first quarter.
GM posted net income of $125 million in the first three months of the year, down 86 percent from a year earlier. The bottom line reflected $1.3 billion in recall-related expenses as well as about $200 million in restructuring costs in GM's European business.
The result for the January-March period was GM’s worst showing since the six-month period after its emergence from bankruptcy in 2009. But record-high transaction prices in North America helped it avoid the loss that many analysts had predicted and notch its 17th straight quarterly profit.
GM also recorded a nonrecurring pretax charge of $427 million, almost entirely for currency fluctuations in Venezuela. GM’s pretax income, including recall outlays but excluding the one-time items -- the figure the company points to as most reflective of its underlying performance -- dropped 74 percent to $466 million.
Revenue rose 1 percent to $37.41 billion.
“Sure, there have been setbacks. That’s part of our business,” GM CEO Mary Barra told analysts during a conference call today to review the first quarterly results since she took over Jan. 15. “Nevertheless, our overall progress has been sure and steady.”
CFO Chuck Stevens reiterated GM’s goal of gaining market share in North America this year, despite the threat the recalls may dampen demand. GM’s share fell in the first quarter to 17.3 percent, from 18 percent a year earlier, according to the Automotive News Data Center.
“Although it is early, it appears we have not experienced a meaningful impact on sales” from the recalls, Barra said.
GM recalled 7 million vehicles during the quarter, equal to its total of the last four years. About 2.6 million are cars being recalled for a faulty ignition lock cylinder and ignition switch, which GM has linked to 13 deaths.
As a result of the recalls, GM said in a quarterly filing today with the Securities and Exchange Commission that it is "the subject of various inquiries, investigations, subpoenas and requests for information" from several government agencies, including the SEC.
It is unclear if the SEC has opened a formal investigation. A GM spokesman declined to elaborate on the filing. An SEC spokeswoman said the commission "can neither confirm nor deny" whether it is investigating GM.
Overshadowed by recalls
Stevens told reporters at GM’s headquarters that the recall costs “overshadowed” an otherwise strong quarter, buoyed by stout pricing in North America, 9 percent profit growth amid record sales in China and better results in Europe, excluding restructuring costs.
“North America, Europe and China are really being led by strong products,” Stevens said.
GM shares closed down 22 cents at $34.17 a share in New York Stock Exchange trading today.
GM’s North American pretax profit was $557 million, down 60 percent from $1.41 billion a year earlier.
Stronger pricing from GM’s redesigned trucks helped add $1.7 billion to GM’s bottom line in North America, compared with the first quarter of 2013.
But that was more than wiped out by the $1.3 billion recall costs, as well as about $1 billion for the extra cost of adding richer content and features on the new pickups and SUVs, which has helped GM command higher prices.
GM’s average transaction price in the United States rose by about $2,000, on average, to $32,794 a vehicle in the first quarter. Average U.S. transaction prices for GM’s light trucks rose by about $5,000 to $38,675, the company said.
Sales of the Chevrolet Silverado, GM’s top-selling model in the United States, are off 8 percent through March. But GM is offsetting the drop in volume -- amid an industrywide discount battle on big trucks -- with stronger pricing. U.S. deliveries of the GMC Sierra are up 4 percent this year.
Stevens said there is a “need to address the competitive challenges at the lower end of the market, especially Silverado.” He said GM is working to lift Silverado’s market share without eroding the gains it has made in selling pricier trucks, such as crew cabs and high-trim models.
“We think we can accomplish both if we’re smart about our go-to-market execution,” Stevens said.
In Europe, GM lost $284 million, nearly double the $152 million it lost a year earlier. The first-quarter loss included nearly $200 million in restructuring costs related to the wind-down of operations at a plant in Bochum, Germany.
Excluding those expenses, GM's European losses would have decreased by nearly $100 million, Stevens said, adding that both GM and the industry overall are performing “better than we expected.” GM said in January that it expected its European Opel unit to gain market share and increase sales in 2014.
GM’s profit in China rose 9 percent to $605 million, driven by record sales of 934,000 units. But the rest of its International Operations unit, which includes Australia, India and several other Asian markets, lost about $300 million. Stevens attributed the losses to restructuring costs tied to plans to end vehicle manufacturing in Australia and higher expenses from launching redesigned trucks in the Middle East.
In South America, GM lost $156 million, compared with a loss of $38 million a year earlier.
Stevens said it's “too early to predict” whether recall costs will spill into the rest of the year. He said the $1.3 billion charge represents GM’s best estimate of its total cost of producing the parts, paying dealers for service work, and providing loaner vehicles to owners.
The cost of the ignition switch recall is about $700 million, GM said. Several other recalls announced during the quarter, including repairs needed to fix a problem with side airbags on 1.2 million large crossovers, account for the balance of the $1.3 billion.
Stevens said GM is working to increase parts shipments to dealerships to repair the faulty ignition lock cylinder and ignition switch.
GM spokesman Jim Cain said the company expects to have enough parts to fix “the majority” of the recalled vehicles by sometime in October.
He said workers at a Delphi plant in Mexico are working seven days a week on multiple shifts. A second line is expected to be operational in coming weeks, with a third expected to come online this summer.