GM is "on plan," says CEO Dan Akerson.
With its bottom line boosted by one-time gains from asset sales, General Motors Co. more than tripled first-quarter earnings, posting a $3.2 billion, $1.77 a share, profit as the revenue from its global business grew by 15%.
“We are on plan,” said Dan Akerson, chairman and CEO.
“GM has delivered five consecutive profitable quarters, thanks to strong customer demand for our new fuel-efficient vehicles and a competitive cost structure that allows us to leverage our strong brands around the world and focus on driving profitable automotive growth,” Akerson said in a statement Thursday.
However, GM’s financial statement also showed that the company’s struggling European operations remained in the red and profits from the company’s European and South American operation declined in the first quarter of 2011.
The first quarter figures reflect GM’s controversial decision to heavily increase its incentive spending in the United States. Though costly, the move appeared to pay off, boosting home market sales by 26%, to 592,545 cars, trucks and crossovers during the period.
The long-time global sales leader — which is apparently on track to regain its sales crown from Toyota this year — surged past Ford, which reported a $2.6 billion first-quarter profit, and Chrysler, which went into the black for the first time since its 2008 bankruptcy, with a $116 million net. GM’s net results also outpaced its key global rivals.
GM’s net income in the first quarter was bolstered by one-time gains, including $1.6 billion from the sales of its remaining stake in Delphi Automotive LLP and $300 million from the sales of preferred shares of Ally Financial Inc., the one-time General Motor Acceptance Corp.
It also includes a $400 million goodwill impairment charge at GM Europe resulting from a change in accounting standards and charges totaling $100 million at GM International Operations related to revised tax regulations affecting the company’s India joint venture. Combined, these special items increased net income attributable to common stockholders by $1.5 billion, or 83 cents per fully-diluted share.
By way of comparison, GM had earned $900 million in the first quarter of 2010.
Earnings before interest and taxes were $3.5 billion. EBIT adjusted to exclude special items was $2.0 billion compared with $1.7 billion in the first quarter of 2010.
GM North America reported earnings before interest and taxes of $2.9 billion compared with $1.2 billion in the first quarter of 2010. On an EBIT-adjusted basis, GMNA increased its earnings by $100 million to $1.3 billion compared with the first quarter of 2010. The company expects GMNA’s quarterly EBIT-adjusted results to improve on average for the remainder of the year compared with the first quarter as better pricing and improved fixed cost should more than offset commodity cost increases and unfavorable mix.
The dark side of the GM ledger is its European unit. GM Europe reported a loss of $400 million on an EBIT basis, which represented a slight improvement from the $600 million loss on an EBIT-adjusted basis in the first quarter of 2010 and it achieved a significant milestone by delivering breakeven results on that basis.
Based on current plans, GME is targeting to achieve breakeven results on an EBIT-adjusted basis — before restructuring — for the entire year.
GMIO reported EBIT of $500 million compared with $900 million in the first quarter of 2010.
GM South America reported EBIT of $100 million, down $200 million from the first quarter of 2010. There were no adjustments in either period.
GM continues to expect no material impact on full-year results from the Japan crisis, despite suffering brief shutdowns at plants in the U.S. and Europe due to parts shortages.
For the quarter, automotive cash flow from operating activities was a negative $600 million and automotive free cash flow was a negative $900 million. Both figures include the $2.5 billion cash impact of GM’s decision, announced in October 2010, to end a wholesale advance agreement with Ally Financial.
GM ended the quarter with very strong total liquidity of $36.5 billion. Cash and marketable securities were $30.6 billion compared with $27.6 billion at the end of the fourth quarter of 2010.
“GM has great potential to deliver profitable growth around the world as the recovery continues,” said Dan Ammann, senior vice president and CFO. “While we’re encouraged, we keenly recognize we have more opportunities to leverage our scale, improve spending and investment efficiencies, and optimize our strong balance sheet.”
The January – March quarter was GM’s first as a publicly-traded company since its 2009 bankruptcy. The maker staged an unexpectedly strong IPO in mid-March of 2010. It is still weighing a second stock offering that is expected to sell off the remaining shares owned by the U.S. Treasury.