GM hits all-time high
Shares of General Motors hit an all-time high Tuesday as investors focused on a US$2.5-billion third-quarter pretax profit and ignored a big accounting loss.
The Detroit automaker's US$3 billion net loss came from a US$5.4 billion charge for selling Opel and Vauxhall to France's PSA Group, which closed in August. But with that backed out and before taxes, the company made US$1.32 per share, trouncing Wall Street estimates. Analysts polled by FactSet expected US$1.11 per share.
Much of the accounting charge came from previous losses that GM can't use to offset future tax obligations.
Revenue without Europe fell 14 per cent to US$33.6 billion, but that also beat expectations of US$32.2 billion.
After hitting the record early, GM shares pulled back to US$46.08, a 2 per cent gain.
GM says its strong pretax performance came despite a 26 per cent production cut in North America during the quarter to close out the 2017 model year and adjust to slowing demand, mainly for passenger cars. The company made just over US$2 billion pretax in North America, as well as just under US$500 million from its joint venture in China.
Chief Financial Officer Chuck Stevens said the company sold more high-profit trucks and SUVs and fewer lower-margin sedans, but it also cut costs at an annual running rate of US$5 billion since 2014. The company also has cut low-profit sales to rental car companies. Stevens attributed the performance to "overall resilience of a better business model that we built in North America".
Investors overlooked the loss because GM has worked hard to shed unprofitable businesses and make its operations more efficient, said Jeff Windau, an industry analyst with Edward Jones.
The company also was helped by strong SUV demand in North America, where it makes the bulk of its profits, Windau said.
Still, Edward Jones rates GM a "hold" rather than buy or sell. Windau says he's concerned about spending on electric and autonomous vehicles with demand yet to be seen. GM also faces intense competition in China and the potential for rising material costs.
On a conference call with industry analysts GM executives also gave details about autonomous vehicles and other business developments.
When GM's revamped pickup truck debuts next fall, GM will have a "broader portfolio" to compete with Jeep and others in off-road performance, CEO Mary Barra said. New full-size SUVs will be built on the same underpinnings.
GM will start testing autonomous vehicles without a human backup driver "in quarters, not years", but will not do that until the cars meet metrics to prove they are safe, Barra said. She didn't say how many quarters.
GM and its Cruise Automation self-driving vehicle unit could partner with another company or GM could deploy the cars on its own, Barra said. The company also is evaluating international markets, including Berlin and London, to test autonomous vehicles.
The company lost production of about 20,000 Chevrolet Equinox compact SUVs during a nearly monthlong strike recently by auto workers at a factory in Canada, Stevens said. That production will not be made up, he said. The strike ended October 16.
With Europe no longer included, GM reported profits for all of its business units for the first time since the fourth quarter of 2014. Even South America, which has been a money loser in recent quarters, posted a US$52 million pretax profit.
With European operations backed out, GM posted a net profit from continuing operations of US$100 million.