The leading U.S. automotive company General Motors (GM, Financial) reported its third quarter, earnings which beat estimates. There was robust demand for crossovers in the company’s home market, supported by impressive sales in the Chinese market. The company beat on both revenue and earnings per share in the third quarter. General Motors’ adjusted earnings per share stood at $1.32, which was 20 cents above the estimates.
Snapshot of the quarter
The Detroit giant posted revenue of $33.6 billion during the third quarter, down 13.5% as compared with the prior year quarter. General Motors reported a net loss of $2.98 billion, which translates to $2.03 per share on a GAAP basis. The company halted production in numerous production units during the quarter which brought the sales down by 26%. However, GM’s CEO Mary Teresa Barra was very optimistic in her comment:
"We delivered solid results even with planned, lower third-quarter production in North America," she said. "We are managing the business with discipline to drive strong performance today, while investing in higher-return opportunities, including those that will shape the future of transportation."
US and China show strength in Q3
The company’s U.S. sales during the quarter were remarkable. The company sold a total of 781,056 vehicles on account of mammoth retail crossover sales of brands such as Chevrolet, GMC, Buick and Cadillac (up 25% year over year). During the quarter, General Motors launched two refreshed crossovers, while on a year-to-date basis added five crossover models.
The company’s operations in China also gave it a good boost in numbers as deliveries stood at 982,311 units, up 12.3% compared with a year-ago quarter. The growth was primarily led by sales of Cadillac and Baojun. To capitalize on this Asian economy’s growth, General Motors introduced five new models during the quarter, which includes the Baojun E100 EV. The American automaker plans to launch six additional model in the fourth quarter.
However, General Motors’ North America revenue plummeted 20% to $24.82 billion during the quarter. Wholesale volumes in the South American region surged 26.6% to $2.57 billion. In addition, General Motors generated $3.01 billion from its international operations, down 11% from the same period last year.
Looking ahead
General Motors has started working to trim yearly costs by $5 billion since the start of 2014, which had allowed the company to maintain a healthy bottom line despite production and sales slowdown. In order to reduce dealer inventory levels, the company had started cutting output at the passenger car factories.
The top American carmaker spends $150 million a quarter towards self-driving technology. Its self-driving Chevy Bolt electric car is all set to undergo mass production. The company plans to have 20 new electric vehicles by the year 2023.
General Motors projects full-year earnings per share to be in the range of $6-$6.50. GM’s stocks jumped 4.25% to $47.07 post the third-quarter earnings.
Some of the challenges that the company faces include lower passenger demand, rise in raw material cost and the labor issue in Canada that led to an undesirable downtime. General Motors is working out ways to adjust to the changing operating environment and remains confident it will sail through the headwinds.
Disclosure: I do not hold any position in the stock mentioned in this article.
