GM headquarters in Detroit. Photo credit: General Motors Company (NYSE:GM).
Excluding one-time items, General Motors Company (NYSE:GM) earned $0.67 a share in the quarter, handily beating the Wall Street consensus estimate of $0.54.
Given General Motors Company (NYSE:GM)’s size and sales, $865 million isn’t a big profit. It’s much less than the $1.6 billion first-quarter profit that smaller rival Ford Motor Company (NYSE:F) reported last week.
But sometimes, the headline number doesn’t tell the whole story. This is one of those cases.
Europe may finally be turning around
One of the big stories here was General Motors Company (NYSE:GM)’s loss in Europe: At $175 million, it was much smaller than nearly anyone had expected. Most observers, including your humble Fool, expected a loss in the $400 million-$500 million range.
But there are signs that General Motors Company (NYSE:GM)’s moves to restructure its long-troubled European operation are taking hold earlier than expected. Sales in much of Europe were terrible in the first quarter, as deep recessions drove industrywide totals to lows not seen in almost two decades. But the story here is that General Motors Company (NYSE:GM) held the line on pricing, resisting the urge to match competitors’ deep discounts, and let the hard cost-cutting moves it has made over the last year take hold.
Here are the highlights from GM’s other regional business units. All of these numbers (and the Europe loss) are what GM calls “EBIT-adjusted” – meaning that they exclude taxes and some other items to give a better basis for comparison:
- North America earned $1.4 billion, down from $1.6 billion in the year-ago quarter – but better than the $1.2 billion expected by analysts. GM’s U.S. sales were actually up 9.3% in the first quarter, ahead of the overall market. But pricing was relatively weak versus the year-ago quarter, as GM raised incentives to help clear out inventories of Chevy Silverado and GMC Sierra pickups ahead of new models due later this year. Still, those incentives were less than had been expected (and they came down in April).
- South America posted a loss of $38 million, down from a $153 million profit a year ago. As with Ford Motor Company (NYSE:F), Venezuela’s currency devaluation weighed heavily: GM took a one-time charge of $162 million as a result, which more than wiped out the improvements in pricing that GM saw in the region during the quarter
- International operations, GM’s “rest of the world” unit that includes its massive China operation, posted a profit of $495 million, down a bit from $521 million a year ago. GM is investing heavily to build a series of new factories in China and India, and those costs will weigh on earnings for the next several quarters. GM reports earnings from its joint ventures in China as equity income, and that totaled $550 million for the first quarter, reflecting increased sales.
- GM Financial, the company’s in-house financing arm, earned $180 million, down slightly from $181 million a year ago. Leases were up, subprime loans were down, credit losses were up very slightly, but overall, a solid result for a business whose importance to GM extends far beyond its contribution to the bottom line.
