General Motors Reports $3 Billion Profit Despite Sales Challenges

U.S. sales have dropped, and a once reliable joint venture in China is facing losses, yet General Motors still managed to achieve a third-quarter profit of $3 billion, which is slightly less than their earnings from the same period last year.

The Detroit-based company reported revenues of $48.8 billion from July through September, marking a 10% increase compared to last year. This growth was supported by stable average vehicle sale prices in the U.S., which remained above $49,000.

Chief Financial Officer Paul Jacobson noted that overall U.S. sales fell by 2.2%, mainly due to a decrease in sales to large fleet buyers. However, sales to individual customers, which typically yield higher profits, increased by 3%.

While other car manufacturers have struggled with excess inventory of high-priced models, General Motors has not yet encountered this issue. Jacobson commented to reporters, "I think that the consumer has held up remarkably well for us." He also expressed optimism for next year, stating that the Federal Reserve's actions to lower interest rates should help maintain a favorable market environment.

When excluding one-time charges, GM reported an adjusted profit of $2.96 per share, surpassing Wall Street expectations of $2.38, as reported by FactSet. The company’s revenue also exceeded analyst predictions of $44.67 billion.

Following these announcements, shares of General Motors Co. climbed by 2% prior to the market opening on Tuesday.

In contrast, the company’s joint venture in China reported a loss of $137 million, a significant decline from a profit of $192 million in the previous year. Jacobson indicated that this loss was a result of challenging market conditions in China, where domestic brands are producing high-quality vehicles at lower costs.

The company is currently collaborating with its partner, SAIC, to restructure its operations in China, with several important meetings scheduled for the fourth quarter. "We really haven’t instituted any of the real restructuring yet," Jacobson explained, adding that despite the losses, sales have been increasing, and inventory levels are being managed more effectively. "We believe that the situation is improving, but there’s still work to do with our partner," he acknowledged.

On a positive note, pretax profits in North America increased by 13% to $3.98 billion. However, losses for the Cruise autonomous vehicle unit, which faced challenges after losing its license to operate robotaxis in California following an incident last year, were reduced to $435 million. Cruise has resumed testing with safety drivers in three locations, along with driverless trials in Houston.

The solid performance in the third quarter allowed GM to adjust its full-year net income guidance. The new outlook predicts earnings between $10.4 billion and $11.1 billion, which is slightly revised down from the previous estimate of $10 billion to $11.4 billion.

During the quarter, GM sold 32,000 electric vehicles, benefiting from discounts that were 11 percentage points below the industry average. CEO Mary Barra mentioned in a shareholder letter that the company is making progress towards achieving profitability in the electric vehicle sector. GM anticipates producing 200,000 electric vehicles within the year.

"We’re seeing demand start to inflect a little bit higher as we’re building awareness out there for the products," Jacobson highlighted.

Automaker, Profit, China, Sales, Vehicles