Updated at 1 p.m.
SOUTHFIELD, Mich. • General Motors reported third-quarter profit that beat estimates as recall expenses ebbed and North American customers flocked to pickups and sport-utility vehicles.
Adjusted earnings per share rose to 97 cents, topping the average analyst estimate for 95 cents. A year ago, the company earned 96 cents on that basis, the company said in a statement. GM has exceeded analysts’ estimates six of the last nine quarters. GM’s recall expenses are “substantially behind us,” Chief Financial Officer Chuck Stevens said on Bloomberg Television.
“Overall, GM results tracked better than expected,” Ryan Brinkman, a JPMorgan Chase analyst, wrote in a report Thursday. “Some investors were concerned GM could post significantly worse-than-expected results in Europe and South America.”
The largest U.S. automaker said operating profit in North America rose 12 percent to $2.45 billion. GM sales of profitable trucks have risen 5.9 percent so far this year in the U.S., including a 53 percent rise in the luxury Cadillac Escalade SUV and a 5.9 percent gain in Chevy Silverado pickup deliveries, according to Autodata.
Barra, GM chief executive officer since mid-January, has weathered Congressional hearings, public outcry and a blistering internal investigation that prompted her to fire 15 employees after she disclosed vehicle defects in February that have since been linked to 29 deaths.
“We understand we have real work to do, and we’re on it,” Barra said on a conference call Thursday with analysts and reporters. She said the automaker has repaired about 1.2 million vehicles for the fatal ignition switch flaw, or about half the models still on the road, and is redoubling efforts to reach more owners.
GM said adjusted automotive free cash flow swung to a decline of $800 million in the quarter from $1.3 billion positive a year ago because of an extra week in the payment cycle to suppliers and cash payments related to repairing recalled vehicles, including costs to expedite parts to dealers. Automotive cash flow from operations was about $700 million positive.
GM’s available liquidity fell to $36.6 billion from $37.3 billion at the send of September 2013.
The adjusted automotive cash flow should return positive this quarter and, excluding recall costs, the second half of the year will be stronger than the first half for GM, Stevens said on a conference call with investors.
GM has said it may need to pay as much as $600 million for death and injury claims and spent $2.5 billion on recalls in the first half of this year. It also took a second-quarter charge of $1.3 billion, including $400 million for victim compensation, which is why the cash costs don’t affect the adjusted EBIT.
While North America improved, other regions did worse. Losses in Europe widened 63 percent $387 million from $238 million a year earlier as measured by adjusted earnings before interest and taxes, driven by $200 million in restructuring costs. GM had a small loss in South America, compared with a profit of almost $300 million in 2013. GM’s adjusted EBIT (earnings before income and tax) from other international operations slid 20 percent to $259 million.
Future margin gains will be fueled by improvements in North America, China and Europe, Stevens told investors Oct. 1. South American and other international operations will lose money in the short term as GM works to fix those businesses, he said at the time.
Barra and her top executives three weeks ago promised a 10 percent profit margin by early next decade, fueled by margins in China that will remain in the 9 percent to 10 percent range, cutting the number of vehicle frames from 14 to 4 and leveraging new models. In the meantime, the automaker said it would guard its $38.8 billion in liquidity and return some of its cash to investors in the form of higher dividends.
GM’s average transaction price for models sold in the U.S. in the first half of October rose to $35,000, the highest in the industry, and may push fourth quarter North American EBIT profit margins ahead of the 10 percent target, Joseph Amaturo, a Buckingham Research analyst, wrote in an Oct. 20 report.
Among analysts, 56 percent recommend a buy and they predict the shares will gain more than 30 percent in the next year. Only 16 percent suggest selling.
Net income attributable to all stockholders slid 14 percent to $1.47 billion, while net attributable to common stockholders doubled to about $1.4 billion. In the third quarter of 2013, GM repurchased $800 million of preferred shares, contributing to the large difference in the year-earlier results by the two measures.
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