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GM Sees Profit but Warns of Pressure

November 4, 2010
3 min to read


General Motors Co. said it expects to report $1.9 billion to $2.1 billion in third-quarter profit, on higher truck sales and the stronger U.S. auto market. But it warned that profit in the current quarter will be weaker as it trims production of high-margin models such as pickups and sport-utility vehicles, The Wall Street Journal reported.


The preliminary earnings, issued as GM gears up for an initial public offering of stock later this month, put the company on a path to produce its first annual profit since 2004. GM made $865 million in the first quarter and $1.2 billion in the second.

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GM said third-quarter revenue rose about 21 percent to some $34 billion from a year earlier, and pretax profit totaled $2.2 billion to $2.4 billion. By comparison, in the third quarter of 2009, GM suffered a $1.2 billion loss after going through a U.S.-funded restructuring in bankruptcy court.


GM expects to produce fewer trucks in the fourth quarter because it has brought supply in balance with demand. It also is making big expenditures on new-product development and vehicle launches, including the Volt battery car. All this means pretax profit will be "significantly lower" than in the previous three quarters, it said.


"We will deliver a solid and profitable first year post-bankruptcy, and we are continuing to improve our balance sheet and most importantly, the quality of our vehicles," Chief Financial Officer Chris Liddell said in a statement.


In the third quarter, GM built 313,756 pickups and SUVs, up 43 percent from the same quarter of 2009, when it was restarting its plants after bankruptcy. This year, GM canceled its traditional July summer plant shutdown to meet demand for trucks.


GM will have made about $4 billion so far in 2010, including the third quarter. It's a dramatic reversal after five straight years of annual losses. GM, however, still falls short of rival Ford Motor Co., which made $6.4 billion in this year's first nine months.

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GM executives will tout the third-quarter earnings when they begin a "road show" this week to pitch the IPO to investors. GM said it will release full third-quarter results Nov. 10.


The auto maker on Wednesday also gave further details of its IPO in a government filing. It confirmed reports that the transaction would reduce GM's U.S government stake to around 35% from its current 61%, and that the offer will seek to sell $10 billion in common shares and $3 billion in preferred shares.


In the offering, the U.S. Treasury would sell $7 billion of its shares. A United Auto Workers trust, which pays for retiree health care, would sell $2 billion of its shares, while Canada and Ontario would offload around $1 billion of shares.


GM also said Wednesday its October U.S. sales rose 4.2% from a year earlier, a lower increase than many competitors saw.

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