GM "demonstrated...significant progress," said CFO Chris Liddell.
Landing right in the middle of its forecasted range, General Motors is reporting a third-quarter profit of $2.0 billion, and the maker is predicting a full-year profit, as well, although the pace is slowing down. It would be the first full year in the black since 2004.
The third-quarter net, which works out to $1.20 a share after a three-for-one split, marks the third consecutive quarter in the row GM has run in the black, a significant turnaround from its situation prior to last year’s bankruptcy – all the more so considering current U.S. car sales remain at deep recessionary levels.
“As demonstrated by our third consecutive quarter of profitability and positive cash flow, these results continue our significant progress,” said Chris Liddell, vice chairman and chief financial officer, in a prepared release.
Last week, when announcing details of its long-awaited IPO, GM had indicated it would post a roughly $2 billion profit for the quarter, with an upside of $2.1 billion, so there are few surprises in this morning’s announcement. Nonetheless, confirmation of the forecast will help GM officials, including Liddell and his boss, CEO Dan Akerson, as they head out to win over potential investors who will be asked to support the anticipated $13 billion General Motors IPO.
The maker has indicated it will seek between $26 and $29 per share during the initial public offering. A specific date has yet to be announced, but industry insiders believe the stock sale will occur on November 18th.
As part of its bankruptcy-led restructuring, GM aimed to be able to break even at an annual North American sales rate of around 10.5 million. While the industry has yet to post a significant recovery, the third quarter saw a modest upturn into the low 11-million range. That generated revenues of $34.1 billion GM reported.
Earnings before interest and taxes, or EBIT, came in at $2.3 billion. Notably, the EBIT for North America was $2.1 billion, up from $1.6 billion during the second quarter of 2010.
The maker’s overseas operations, which now account for about two-thirds of its unit sales, had some problems crop up during the quarter, however. GM Europe saw a $600 million loss for the July-September period, compared with a second-quarter loss of $200 million. GM International Operations were still in the black, but EBIT dipped from $700 million, during the second quarter, to $600 million for the most recent period.
“We know we have much more work to do,” CEO Akerson said during a conference call with the media. “We still have to fix Europe,” and GM needs to do an even better job of marketing its products, he added.
Globally, GM reported delivering 2.1 million vehicles for the quarter, a decline of 90,000. About 60% of that decline came in the U.S. market. During comments to reporters, Liddell pointed to “a planned reduction” in fleet sales in North America, part of the maker’s growing emphasis on higher-profit retail sales. Retail sales for the quarter came in at 16.2% compared with 16.3% during the second quarter.
Meanwhile, Liddell noted, the maker was able to boost its overall share, in October, from 17% to 19%. At the same time, it held incentives stable at about $3000 per vehicle sold in the U.S. Meanwhile, he cited a “favorable mix,” shifting towards more profitable models, including larger cars and pickup trucks.
The maker’s release noted it expects a black fourth quarter on an EBIT basis, “albeit at a significantly lower run rate than each of the first three quarters.” The company also expects to deliver profitable results on a net basis for the full 2010.
The release of the third-quarter earnings report caps a series of steps GM has taken, in recent weeks, to prepare for the planned IPO. Among other moves, the maker is cutting debt by $11 billion, which should yield an annual savings of $500 million, it said. (Click Here for details.)
Meanwhile, the automaker announced it had topped the 2 million sales mark in China, by the end of October, the first time any manufacturer had achieved that milestone. A new deal with Shanghai-based partner SAIC, GM also reported, is expected to help boost sales in both China and other emerging Asian markets, notably India. (For more on the SAIC deal, Click Here.)
The upcoming IPO is expected to yield approximately $13 billion from the sale of both common and preferred GM shares. The offering will reduce the stake held by the U.S. Treasury from 60.1% to about 40%. But taxpayers could lose as much as $5.4 billion, according to industry estimates, depending upon the actual share price on the day of the IPO. (Click Here for the details.)