DETROIT -- General Motors today said its earnings jumped 34 per cent in the first quarter, defying a slowdown in the U.S. market with stronger retail sales of SUVs and crossovers and growth at its financing arm.
GM’s net income of $2.6 billion (all figures U.S.) was the most of any first quarter since its 2009 emergence from bankruptcy. It also set first-quarter records for revenue, pretax profit and profit margins, both globally and for North America.
General Motors Canada’s earnings are rolled into the North American earnings.
In Canada, the automaker led the county in March sales with 30,115 vehicles sold. Through the first three months of 2017, to General Motors sales in Canada were 61,248 units, up 12.1 per cent from a year ago.
GM Canada is headquartered in Oshawa, Ont. It also has a new Canadian Technical Centre in Markham, Ont., and a cold weather testing facility in Kapuskasing, Ont., in addition to three manufacturing facilities in Ontario.
GM’s results, posted a day after Ford Motor Co. reported a 35 per cent decline in its first-quarter profit, illustrate a growing divergence between the two largest Detroit automakers’ strategies and performance, as both companies struggle to generate enthusiasm on Wall Street.
“Our first-quarter results reflect our resolve to grow profitably and demonstrate the strong earnings power of this company,” GM CEO Mary Barra said in a statement. “More importantly, we advanced our strategic plan to transform GM for the long term and unlock more value for our shareholders.”
It was the eighth consecutive quarter in which GM’s results topped expectations on Wall Street. The earnings were equal to $1.70 a share, while analysts had projected $1.48.
GM said revenue rose 11 per cent to $41.2 billion. Earnings before interest and taxes increased 28 per cent to $3.4 billion on a margin of 8.2 per cent, up from 7.1 per cent a year earlier.
Rougher road ahead
But GM’s results will take a hit later in the year, when it has scheduled 10 weeks of downtime at multiple North American factories for retooling in preparation for several vehicle redesigns. CFO Chuck Stevens said the downtime will happen in the third quarter and reduce output by about 60,000 units.
The temporary shutdowns will affect production of pickups and crossovers, which are among GM’s most profitable vehicles. Because automakers book revenue as vehicles are shipped to dealers, rather than when dealerships sell them, the downtime could have a significant impact on GM’s third-quarter performance. It’s also boosting GM’s results now, as the company amasses extra inventory in preparation.
Stevens said GM expects to end 2017 with about the same level of inventory as it started the year with — a 71-day supply — which would represent a sizeable decline from the 97 days’ worth it had at the end of March, according to the Automotive News Data Center.
About half of the inventory build-up this year has been tied to the downtime later in the year, Stevens said. GM already cut production shifts at three car plants in Michigan and Ohio in the first quarter after demand for those models weakened.
“Typically you build inventory in the first quarter anyway, because the spring selling season starts,” Stevens told reporters at GM’s headquarters today.
Its North American profit surged 49 per cent to $3.4 billion, accounting for nearly all of the company’s total increase for the quarter. Revenue for the region was up 11 per cent to $29.3 billion, even though wholesale volumes rose just 7.5 per cent, and margins grew to 11.7 per cent, from 8.7 per cent a year ago.
GM lost $201 million in Europe, compared with just a $6 million loss a year earlier. The company made a $2.3 billion deal in March to sell its European operations to PSA Group of France. The sale is expected to close by year’s end.
South American losses nearly doubled, to $115 million.
GM earned $319 million from its other international operations, down 16 per cent despite steady sales in China amid weakening demand in that market. GM Financial earned $260 million, a 16 per cent increase.
GM has said its 2017 profit would be flat or up slightly from last year. GM earned $12.5 billion in 2016 before interest and taxes, a 16 per cent gain from the prior year.
The company is introducing four redesigned crossovers this year, including the third-generation Chevrolet Equinox that began arriving at dealerships in March. Updated versions of the Chevy Traverse, GMC Terrain and Buick Enclave are coming in the second half of 2016.
GM has said those vehicles would help North American margins top 10 per cent for a third consecutive year in 2017.