China and Truck Sales Drive Profit at GM That Beats Wall Street

Including $1.5 billion in costs for expenses related to the settlement of a Justice Department investigation of the automaker’s mishandled ignition-switch recall, GM said net income for the latest quarter was 84 cents a share.

North American pre-tax earnings for GM were up 34% at a record $3.3bn. Overall, GM’s market share in Europe has declined by 70 basis points since the beginning of the year due to wind down of operations in Russian Federation as well as the withdrawal of the Chevrolet brand from several markets.

In China, GM reported pretax income of $463 million, down 4 percent from a year ago, but profit margins rose from 9.6 percent to 9.8 percent because the company sold more expensive Cadillacs and SUVs. That fell short of Wall Street expectations: The average estimate of analysts surveyed by Zacks Investment Research was for $1.31 per share. That compares with $1.38 billion, or 81 cents per share, a year ago.

“We will achieve our 10 percent margin objective in 2015”, GM Chief Financial Officer Chuck Stevens told reporters at the company’s headquarters Wednesday.

Based on the same formula, which likely will be part of the upcoming contract talks, the profit-sharing payment would be based on the $8.3 billion number, plus whatever North American profit GM makes in the fourth quarter.

“These results reflect our work to capitalize on our strengths in the US and China, while taking decisive, proactive steps to mitigate changes elsewhere”, CEO Mary Barra said in a statement. “GM is a vastly different company today than just five years ago”. Stevens said GM is benefiting from improved profitability on its redesigned Corsa subcompact, Opel’s highest-volume vehicle, which was launched earlier this year. Analysts surveyed by Zacks expected $8.38 billion.

General Motors said that revenues would have been higher by over $2.3 billion if the exchange rates were constant. Adjusted for one-time gains and costs, earnings totaled 43 cents per share. This quarter it spent $900 million in legal and another $600 million to settle multiple wrongful death and shareholder lawsuits.

Looking aheadGM’s full-year guidance is unchanged: It still expects EBIT-adjusted and profit margin to improve over 2014 full-year results. The automaker’s sales growth has slowed considerably in China -what has been its largest sales market the past several years – and has been challenged by stalling sales in Brazil.

GM’s performance in other regions was far more modest. GM has been restructuring in Europe in an effort to reverse years of losses.

GM global Operations, which includes China, earned $269 million before taxes, up slightly from $259 million a year earlier.