Co. reiterates expectations for posting its first annual profit since 2004, but also warns fourth-quarter results will pale in comparison to the billions of dollars it has earned so far this year.
“We believe our (fourth-quarter) results will be at a significantly lower run-rate than each of the first three quarters,” GM Vice Chairman and Chief Financial Officer Chris Liddell tells journalists and analysts in a conference call earlier today to detail the auto maker’s latest financial returns.
GM, which emerged from bankruptcy some 15 months ago and will go public again later this month, expects a less profitable mix of car and truck sales in the final three months of the year, as well as greater costs related to the production launch and marketing of key new vehicles such as the Chevrolet Cruze and Volt passenger cars. Spending on research and development to support future products also will increase.
The Cruze and Volt represent two of the auto maker’s most important launches in years, as GM tries to move away from an historical reliance on truck sales and build a reputation as a producer of more fuel-efficient, higher-value vehicles.
GM began Cruze production in September at its Lordstown, OH, assembly plant, where two years ago United Auto Workers union members made big concessions to ensure the auto maker’s first profitable compact car in the U.S. in decades.
Production of the Volt extended-range electric vehicle, which reportedly cost more than the typical $1 billion for a new-product program due to its raft of advanced technologies, gets under way this month at Detroit/Hamtramck. It hits dealer showrooms by the end of the year.
While not expected to turn a profit for GM in its first generation, the Volt is critical to the auto maker’s efforts to remake its image among environmentally conscious buyers.
GM also faces significant manufacturing investment in the coming months, as it retools a pair of factories in North America for the all-new Buick Regal and next-generation Chevy Aveo.
Like other auto makers selling in the U.S., GM must continue to make investments ahead of new fuel-economy regulations taking effect with the ’12 model year.
GM has said it will meet its corporate average fuel economy obligations in that first year of the increase. But by model-year ’16, CAFE regulations for the industry’s fleet shoot up to an equivalent of 35.5 mpg (6.6 L/100 km) from 27.3 mpg (8.6 L/100 km) in ’11, so additional investment will be needed.
In addition, GM expects to buy back some $700 million of preferred shares owned by the U.S. Treasury, which represents a portion of the 61% stake the government owns in the auto maker after sinking $50 billion of taxpayer money into its bankruptcy and turnaround.
Liddell says GM capital expenditures in the fourth quarter will total about $1.9 billion, or $700 million more than it spent in the third quarter and equal to what it doled out through the first six months of the year. GM estimates it will spend $5 billion in 2010.
GM finishes the third quarter with $34.5 billion in cash on hand and $35.8 billion in total liquidity, up from $33.6 billion in the previous 3-month period, and against $8.6 billion of debt. Backing out items such as the debt and its pension obligations, the auto maker currently carries about $20 billion in cash and $6.3 billion in available credit.
An upside-down balance sheet helped tip GM into bankruptcy last year after the recession practically halted new-vehicle sales in the U.S.
GM earned $2 billion, or $1.20 per share, in the third quarter, up from a loss of $908 million, or $0.73 per share, year-ago. The auto maker earned $1.3 billion, or $0.85 per share, in the second quarter.
Revenue totaled $34.1 billion, up 36% from $25.1 billion year-ago and 3% higher than the $33.2 billion of the previous quarter.
“The results of the third quarter clearly point to the amount of progress GM has made,” GM CEO Dan Akerson says on the call, during which the auto maker breaks with tradition and takes no questions ahead of the initial public offering.
“It marks the third consecutive quarter of profitability and positive cash flow,” he adds. “We expect to post solidly profitable results for the calendar year, even though we anticipate our fourth-quarter results will moderate significantly.”
GM’s global sales in the third quarter grew by 93,000 units to 2.1 million, up from 2 million in like-2009. Sales fell by 90,000 units vs. the second quarter, due to a 600,000-vehicle reduction in industry volumes to 7.8 million.
Liddell blames the industry sales decline on a hangover from historically higher demand in all global regions during the summer months.
GM’s global market share dipped to 11.5% in the quarter from 11.8% in like-2009. In the U.S., penetration slipped to 18.3% from 19.4% year-ago, but the auto maker sold more vehicles with four brands than it did with eight last year.
GM’s North American market share fell to 17.7% from 18.7%, while its portion of sales in Western Europe dipped to 8.9% from 9.0% and its share in other international markets remained flat at 10.3%.
GM’s global production volume grew to 2.1 million units in the fourth quarter from 1.7 million year-ago, but fell from 2.3 million in the second quarter. Capacity utilization jumped to 90.1% from 53.3% year-ago, but declined from 92.9% in the previous quarter.