General Motors Reports $3 Billion Profit Despite U.S. Sales Decline and Losses in China

Despite experiencing lower sales in the U.S. and facing losses from its joint venture in China, General Motors has posted a third quarter profit of $3 billion. This figure is slightly lower than the profit recorded in the same period last year.

The Detroit-based auto manufacturer announced a revenue of $48.8 billion for the months of July through September, which marks a 10% increase compared to the previous year. This growth was driven in part by stable average vehicle sale prices in the U.S., remaining above $49,000.

Sales Performance

According to Chief Financial Officer Paul Jacobson, U.S. sales decreased by 2.2% during the quarter, primarily due to a dip in sales to large fleet customers. Conversely, sales to individual buyers, who typically yield higher profits, increased by 3%.

Jacobson noted that while other automakers struggle with an oversupply of high-priced vehicles amidst shifting consumer preferences towards lower-cost options, GM has not yet observed this trend. He expressed confidence in the resilience of consumers, stating, "I think that the consumer has held up remarkably well for us." He anticipates next year's market conditions to mirror those of this year, especially as the Federal Reserve continues to lower interest rates.

In terms of adjusted profit, GM earned $2.96 per share, which surpassed Wall Street forecasts of $2.38 per share. The company’s revenue also exceeded estimates of $44.67 billion, contributing to a 2% rise in GM’s share price before the market opened.

Challenges in China

However, GM's joint venture in China reported a loss of $137 million, in stark contrast to a profit of $192 million from the previous year. Jacobson attributed this loss to difficult market dynamics, as local manufacturers increasingly produce competitive vehicles at lower prices.

To address these challenges, GM is collaborating with its partner SAIC to restructure the Chinese operations, with critical meetings planned in the fourth quarter. Jacobson indicated that while restructuring efforts have not fully taken effect yet, there are positive signs with improved sales and reduced inventory levels.

Pretax profits in North America increased by 13% to $3.98 billion. However, the autonomous vehicle unit, Cruise, narrowed its losses to $435 million after losing its license for robotaxi operations in California following an incident last year. Cruise has since resumed testing with human safety drivers across three regions and plans to conduct driverless tests in Houston.

Future Earnings Outlook

Due to its strong performance in the third quarter, GM has revised its full-year net income guidance. The company now projects earnings between $10.4 billion and $11.1 billion, compared to the previous outlook of $10 billion to $11.4 billion.

Additionally, GM reported that it sold 32,000 electric vehicles during the quarter, with discounts that were 11 percentage points lower than the industry average. CEO Mary Barra emphasized ongoing progress towards electric vehicle profitability and anticipates producing 200,000 EVs this year. Jacobson remarked on rising demand, stating, "We’re seeing demand start to inflect a little bit higher as we’re building awareness out there for the products."

profit, sales, China