October 21, 2015 / 11:40 AM / 3 years ago

GM profit tops estimates on strong truck demand, improved China

DETROIT (Reuters) - General Motors Co (GM.N) reported record quarterly earnings for the third quarter, as strong demand for trucks in North America and improved profit margins in China overcame declining revenues.

General Motors Co. headquarters is seen in Detroit, Michigan, September 17, 2015. REUTERS/Rebecca Cook

GM shares rose 5.3 percent to $35.26 a share and have risen more than $5 since the start of the month.

GM posted profit of $1.50 a share in the quarter, well ahead of the $1.18 per share consensus among Wall Street analysts polled by Thomson Reuters I/B/E/S.

GM’s robust quarter, which the company said was its best ever, contrasted with disappointing results from other big U.S. manufacturers, which have wrestled with slowing growth in China and the drag on revenues exerted by the strong U.S. dollar.

For GM, a big key to its good quarter was in North America, where cheap gasoline has fueled surging demand for large pickup trucks and sport utility vehicles, segments where GM is dominant.

The automaker generated 72 percent of its quarterly revenue in North America, where profit margins hit a record 11.8 percent.

GM Chief Financial Officer Chuck Stevens said the company expects to hit its goal this year of generating 10 percent profit margins in North America for the full year, a year ahead of its previous forecast.

In China, GM’s share of joint-venture profits for the quarter dipped to $463 million from $484 million a year ago, but profit margins rose to 9.8 percent from 9.6 percent, reflecting sales of higher-priced sport utility vehicles and luxury cars.

Overall GM revenues for the quarter fell 1.3 percent to $38.8 billion, largely because of the impact of the strong U.S. dollar. GM said revenues would have been $2.3 billion higher if exchange rates had remained constant.

In the quarter, GM recorded $1.5 billion in costs related to a settlement of a U.S. Justice Department investigation into a mishandled ignition switch recall. Including the charges, net income totaled $1.36 billion, or 84 cents a share, versus $1.47 billion, or 81 cents a share.

GM said the $3.1 billion operating profit and 8 percent profit margins in the quarter, which are both adjusted before interest and taxes, were records for any quarter.

Chief Executive Officer Mary Barra said the company has not altered expectations for diesel vehicle demand due to Volkswagen AG’s (VOWG_p.DE) emissions scandal.

The rise in per-share net income reflected GM’s continuing share buyback program. The company said it has spent $2.9 billion through Oct. 19 in repurchases, putting it more than halfway to its previously announced $5 billion repurchase plan projected to be completed in 2016.

Stevens said the company, in negotiations with the United Auto Workers union, will not agree to labor costs that will threaten its 10 percent North America margins.

Reporting by Bernie Woodall and Joseph White; Editing by Chizu Nomiyama and Jeffrey Benkoe

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