Europe gloom weighs on GM profit

NORTH American car buyers saved the day for General Motors in the first quarter of this year, helping to drive a $US1 billion ($A973b) quarterly global profit against strong financial headwinds in Europe.

GM’s world-wide sales volumes and revenue were both up, but the celebration was sullied by the results from GM Europe, which racked up a $US256 million ($A249m) loss, compared with a break-even result in the same period last year.

The bleak European result – made worse by a $590 million goodwill impairment charge related to worker pensions – helped to drag the GM global result down from $3.2 billion last year.

GM’s European vehicle sales – mainly Opel and Vauxhall cars – fell eight per cent compared with Q1 last year, while GM revenue in the region fell from $6.8 billion to $5.5 billion, falling behind the revenue produced by the China-driven GM International Operations (GMIO) for the first time.

GM chairman and CEO Dan Akerson described GM’s European operations as “a work in progress”, adding: “We’ll continue to work on both revenue and cost opportunities until we have brought GM to competitive levels of profitability.”

Left: General Motors headquarters in Detroit.

GM workers across Europe are bracing for plant closures and job cuts, which could be announced as early as next month.

Across the Atlantic, revenue for GM North America climbed almost $2 billion – from $22.1 billion to $24.2 billion – on the back of a 2.7 per cent increase in sales volume, to 703,000 units across the United States, Canada and Mexico.

This drove a 35 per cent increase in GMNA pre-tax profit, to $1.69 million, even though GM lost more than two percentage points of market share, slipping to 17.5 per cent.

GM attributed its financial gains in North America to higher pricing and less discounting, making its vehicle lines more profitable as the American economy gradually gains strength.

But while GM enjoyed a lift on its home patch, profits dipped elsewhere, including GMIO – which includes the giant Chinese market and Australia – and GM South America, despite an increase in vehicle sales volumes in both of these regions.

However, both regions still made a positive contribution to the bottom line, with GMIO making $529 million ($596 million in Q1 last year) and GMSA earning $83 million ($90 million).

Globally, GM sales were up by 60,000 units for the quarter to 2.28 million units, mainly due to GM’s ever-climbing volumes in China.

However, this figures included 355,000 sales under the Wuling joint-venture brand – a sore point with other manufacturers aspiring to the global sales crown.

First-quarter global net revenue was $37.8 billion, up $1.6 billion on Q1 last year.

GM ended the quarter with $37.3 billion cash in the bank.

The company expects the strengthening US economy to propel the US new-vehicle market to between 14 million and 14.5 million this year – above its original prediction of 13.5-14 million – but it says GM results over the next two quarters can be expected to remain about the same as the first quarter.

GM senior vice-president and CFO Dan Ammann said the company was aggressively eliminating complexity to reduce cost.

“At the same time, we are preparing for more than 20 major vehicle launches around the world in 2012 to drive revenue this year and farther into the future,” he said.

In 2011, GM made a $7.6 billion 12-month profit, on revenue of $150 billion.