Editor's note: GM's retail market share in the U.S. during the first quarter rose 1.1 percentage points, to 16.6 percent. Earlier figures provided by GM were incorrect.
DETROIT -- General Motors' first-quarter pretax profit surged 28 percent -- even while its global sales slipped -- as the company aggressively cut costs in troubled regions and sold pricier vehicles across its key markets.
GM said today its pretax operating income -- the figure the company considers most reflective of its underlying performance -- rose 28 percent, to $2.66 billion. That amounted to a pretax profit of $1.26 a share, hurdling the $1-a-share average forecast of analysts, compiled by Reuters.
The improved results were broad-based: Each of GM’s four operating regions posted a stronger bottom line, even as economic headwinds made it tougher to do business in several markets globally. That was especially true in South America, where GM shored up its losses to $67 million, from $214 million a year earlier, despite a 26 percent slide in sales there.
GM narrowly missed breaking even in Europe, posting a $6 million pretax loss, vs. a $239 million loss in the same period a year earlier. The company has long targeted 2016 as the year it finally stanches the flow of red ink there.
“This is really driven by Opel’s product offensive,” GM CEO Mary Barra said during a conference call with analysts, citing the success of the redesigned Astra compact, which in March was named the European Car of the Year.
Overall, GM’s net income more than doubled, to $1.95 billion from $945 million in the first quarter of 2015, which was weighed down by about half a billion dollars in nonrecurring items, mostly from costs related to GM’s wind-down of the bulk of its Russian operations.
First-quarter revenue rose 4 percent, to $37.27 billion, surpassing analysts’ estimates of $35.71 billion.
GM’s shares rose 47 cents, or 1.5 percent, to close at $32.66, just below its initial public offering price from November 2010.
“GM is executing well,” RBC Capital Markets analyst Joseph Spak wrote in a client note.
GM was able to pad its bottom line during the quarter despite global sales slipping 2.5 percent, mainly through the sale of more-profitable vehicles across its biggest markets and aggressive cost-cutting in troubled regions such as South America.
An increase in pickup and SUV sales and a boost in pricing from the recently launched Malibu sedan and Camaro sports car helped GM to a $2.3 billion pretax profit in North America, up 5 percent from a year earlier. GM’s sales in its most-profitable region rose just 1.2 percent, to 800,000 vehicles. GM said the growth was fueled by retail sales amid a pullback on less-profitable rental-car business.
GM said its retail market share in the U.S. during the quarter rose 1.1 percentage points, to 16.6 percent. In a roundtable interview with reporters at GM’s headquarters this morning, CFO Chuck Stevens said the retail-share gain “is the true measure of how well you’re doing from a product perspective and a brand perspective.”
Across the rest of its operating regions, GM’s pretax profit improved by nearly $400 million despite continued tough market conditions in several key markets.
Flat in China
In China, GM posted a $518 million pretax profit, flat from a year earlier. GM said it was able to offset a drop in demand for smaller passenger vehicles with stronger sales of more-profitable vehicles, specifically SUVs and Cadillacs. The country is included in GM’s International Operations unit, which also includes several other Asian markets and posted a $379 million pretax profit, up 2 percent.
In Europe, the hot start for the Astra and the continued strength of the Mokka subcompact crossover helped lift sales 8.4 percent, a faster clip than the overall market.
Stevens credited the improvement in South America to GM’s efforts to “right size” the business, including a roughly 20 percent reduction in its work force in the region last year.
“South America is a very volatile environment to do business in,” Stevens said. “We want to … drive our break-even point down, focus on a strong product launch, reduce our reliance on fleet sales, so that when the market recovers we’re going to be in a great position to take advantage of the upside.”
GM Financial, the company’s captive-finance arm, posted a pretax profit of $225 million, up 5 percent.
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