General Motors (GM, Financial) released its third quarter 2014 earnings on October 23 before the market opened. And surely investors’ moods lit up after the Detroit giant’s earnings thrashed Street estimates along with solid margins. Though its international operations were a bit shaky, the company managed to perform with flying colors thanks to its domestic market.
Some essential numbers
General Motors revenue saw a marginal improvement year-over-year and came in at $39.3 billion. The largest U.S. automaker reported net earnings of $1.47 billion. However, the automaker’s profits fell 14.3% from last year’s $1.72 billion on account of repurchase of preferred shares, it was better than expectations. What's more surprising was that the company was able to post decent earnings figure despite its struggling international operations.
This was led by the car maker’s strong performance in the North American and Chinese market that more than set off the depression seen in the European and South American markets. The company’s earnings per share stood at $0.97, two cents ahead of what the consensus had estimated.
North America and China: The strong markets
The improvement in the North American operations is reflected in the rising margins as well. Operating margin climbed to 9.5%, compared with 9.2% in the same quarter last year. Earnings from operations in North America increased by a good 12.1% to $2.45 billion. The company experienced strong quarterly deliveries that shot up 12.8%, thanks to U.S.’s soft corner for cars.
Chevrolet truck with dual rear wheels, Picture from Wikimedia Commons
The other region that registered growth numbers was China. The emerging nations has great appetite for General Motors cars. The company has strong presence in North American and China – two places that are going to be the future growth engines for automakers. In fact, China is becoming a hot destination for global auto giants. These two markets should assist the automaker to compensate for the weaknesses in other markets and help boost financials in future.
Europe and South America: A tough patch
Losses are continuing to pile in the European market as consumers aren’t spending much due to dull economic scenario. The company had to make an impairment charge of $200 million in Russia. On the other hand, operations in South America reported a loss of $32 million, against a $284 million gain recorded in the last year comparable quarter. A currency devaluation in Venezuela adversely affected the sales amount. In Brazil, delivery count was pretty weak on the back of an uncertain economic situation.
Another important step
GM CEO Marry Barra confirmed that one of the near term goals of the company is to increase operational efficiencies while the product is under development. This would help the company minimize the enormous scale of recalls it’s witnessed in the present fiscal year. These recalls not only squeezed the profitability margin and accounted for massive expenses, but has had a negative impact on the company’s image too.
To identify and fix the issue, General Motors has formed an investigation team to look into the matter. The company is striving hard to move past this unpleasant phase of massive recalls. This should improve both the top and bottom line of the company.
Parting thoughts
Though General Motors witnessed challenges in its international operations, the company sailed through it. Earnings came in as per what the company had expected. The automaker remains focused on delivering customer value and satisfaction while the market gets competitive. The company’s prospects look good in the long run.
