Tag Archive | "General Motors Co."

GM’s First Quarter May Be Most Profitable in 11 Years on Sales

General Motors Co., the largest U.S. automaker, may report $1.74 billion in net income for the three months ended in March as rising sales in the U.S. and China helped the company to its best first quarter since 2000.

Earnings probably rose 63 percent from $1.07 billion a year earlier, according to the average of four analysts’ estimates compiled by Bloomberg. The results, to be released tomorrow, would be the fifth straight quarterly profit for the Detroit- based automaker since emerging from bankruptcy in July 2009.

The automaker’s performance and the market’s reaction will help determine how quickly the U.S. Treasury Department can start selling the remaining 33 percent stake held in the company. The Treasury can file to sell its shares as soon as May 22 and will track market prices after earnings are announced, a person familiar with the matter said last month.

“There needs to be some catalyst to move the stock,” said David Whiston, an analyst with research firm Morningstar Inc. in Chicago. “It will probably take several quarters of beating analyst estimates to get the stock price in the high $30s.”

GM hasn’t closed above last year’s $33 initial public offering price since March 3 as investors evaluate how much the company is outspending competitors to boost sales and assess management stability following the April 1 departure of Chief Financial Officer Chris Liddell, Whiston said. While the maker of Chevrolet, Buick, GMC and Cadillac cars will post strong results, the challenge is getting investors to notice, he said.

GM yesterday rose 81 cents, or 2.5 percent, to $32.99 in New York Stock Exchange composite trading. The stock has fallen 15 percent from its Jan. 7 closing high of $38.98.

Earnings probably rose partly because of sales growth in North America, Chris Ceraso, an analyst at Credit Suisse Group AG in New York, wrote in an April 21 research note. Sales increased industrywide in North America, with GM grabbing a larger portion by offering buyer incentives, Ceraso said.

“After all of the concern over GM’s incentive strategy, it appears that the favorable profit contribution from higher volumes more than offset the additional cost from the incentives,” Ceraso wrote.

Excluding certain items, GM is expected to report first- quarter profit of 91 cents a share, the average of 13 estimates.

GM said April 1 that U.S. sales jumped 26 percent to 592,545 vehicles in the first quarter as demand for the Chevrolet Cruze helped double the company’s share in the compact-car segment to more than 11 percent.

With Japanese automakers facing inventory shortages stemming from the March 11 earthquake and tsunami, GM may be able to add 1.1 percentage points of total U.S. market share and boost earnings per share this year by 60 cents, Colin Langan, a UBS Securities analyst in New York, said in a May 3 report. He upgraded the stock to “buy” with a $42 12-month price target.

“GM will be the biggest beneficiary of the upcoming Japan- related inventory shortages,” Langan said.

GM’s margins probably improved in the first quarter, Itay Michaeli, an analyst at Citigroup Global Markets in New York, said in a telephone interview.

“There’s a positive read-through from Ford’s earnings, Michaeli said. ‘‘Look at how nicely Ford’s margins recovered in the first quarter, and how they did in Europe, where everyone has been struggling,” Michaeli said.

GM is expected to retake the crown for most global auto sales from Toyota Motor Corp. this year, said Jeff Schuster, executive director of forecasting for J.D. Power & Associates, a research firm in Westlake Village, California. Toyota has lost production because of plant shutdowns following the earthquake. GM also is better positioned to expand sales in China, he said.

While GM may see weaker results in China in the short-term as some regional governments restrict car sales to manage traffic congestion, GM’s China operations are a reason to buy the stock, Michaeli said in his note.

“What happened in the first quarter was not a structural change in demand in China,” Michaeli wrote. “These are more growing pains and near-term volatilities you have in a growing market. The core fundamentals for China vehicle penetration remain very strong.”

Citigroup is forecasting about 15 percent growth in China car sales and a little less than that for GM. Last year, car sales rose 27 percent in China, Michaeli said.

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Automakers Reduce U.S. Incentives in April to Five-Year Low

Automakers reduced spending on discounts and incentives for U.S. customers in April by 14 percent to an average $2,320 per vehicle, the lowest in more than five years, as sales climbed.

Ford Motor Co. average spending on discounts and promotions declined 20 percent from a year earlier to $2,399, Woodcliff Lake, New Jersey-based Autodata Corp. said yesterday. Chrysler Group LLC lowered spending 23 percent to $2,806, and General Motors Co. reduced incentives by 8.1 percent to an estimated $3,068 per vehicle..

Industrywide light-vehicle sales ran at a seasonally adjusted annual rate of 13.2 million in April, Autodata said, accelerating from a year earlier and exceeding the 13 million pace that was the average estimate of 12 analysts surveyed by Bloomberg. Incentives are likely to continue dropping in the coming months due to Japan-related supply shortages, said Jesse Toprak, vice president of industry trends at TrueCar.com.

“The outlook for incentives is that they are going to be down dramatically,” Toprak, whose auto-pricing website is based in Santa Monica, California, said yesterday in a telephone interview.

General Motors Co. reduced incentives by $272, or 8.1 percent from a year earlier, to an estimated $3,068 per vehicle. Toyota Motor Corp., the world’s largest automaker, reduced spending $60, or 3.1 percent, to an estimated $1,885 per unit, Autodata said.

Honda Motor Co., fourth in the U.S. sales by volume, raised incentives to $2,171, 8.7 percent more than a year earlier, according to Autodata. Nissan Motor Co. reduced discounts by 33 percent to $1,998.

The last month that industrywide average incentive spending was lower was October 2005 at $2,204 per unit, David Lucas, an analyst for Autodata, said in an e-mail.

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GM Rises to No. 1 on Sales Toyota Can’t Match After Quake

General Motors Co., less than two years after declaring bankruptcy, is poised to reclaim the global auto sales lead this year from a Toyota Motor Corp. rattled by natural disasters and reports of slipping quality.

GM may retain the top spot after auto-parts production in Japan recovers from the March 11 earthquake. Detroit-based GM plans to invest at least $5 billion in China to double sales to 5 million vehicles by 2015. After years of losing ground in the U.S. to cars like Toyota’s Camry, GM’s Malibu has won better reviews and a new version is coming, reported Bloomberg.

Add it up and GM may retake the sales crown lost in 2008, when the U.S. automaker lost $30.9 billion and sought a federal bailout following Toyota’s most profitable fiscal year. Today GM is on the mend while Toyota confronts a slumping reputation, a stronger yen that hurts profit on U.S. sales, and the prospect that its production in Japan won’t recover until November.

“It’s safe to say that GM is crawling back in the mature markets and growing quickly in emerging markets,” said Jeff Schuster, executive director of forecasting for J.D. Power & Associates, a research firm in Westlake Village, California. “It’s a challenging road ahead for Toyota. They face some real issues in the U.S.”

Toyota President Akio Toyoda in March said he would start a campaign to rebuild the company’s image in the U.S. following recalls that totaled more than 10 million vehicles. Toyota had to repair the cars because sticking accelerator pedals and faulty floor mats led to some sudden acceleration claims.

The Toyota City, Japan-based automaker this week plummeted to 43rd place from No. 20 in a Harris Interactive’s annual poll assessing the reputation of 60 corporations.

Even before the recalls, auto critics were saying the competition had started catching up to Toyota. Edmunds.com rated the 2008 Malibu higher than the Camry. While Consumer Reports still recommends many Toyota models, its critics find Toyota is using cheaper interior materials these days, said Jake Fisher, senior auto engineer with the Yonkers, New York, magazine.

Toyota’s margins have also been hurt by a weaker dollar. Of the cars and SUVs the company sells in the U.S., about 30 percent are made in Japan, including 11 of 12 Lexus models and all Prius hybrids. After years of a weak yen boosting profits, the Japanese currency has strengthened to 81 yen to the dollar from 112 at the end of 2007.

Each 1 yen change versus the dollar equates to about 30 billion yen ($370 million) of effect on profit, Toyota said.

In China, the world’s fastest-growing car market, Toyota has been slower to invest in factories and small, inexpensive cars.

GM arrived earlier and has won over consumers with high-end Buicks and cheaper Korean-engineered Chevrolet models, said Michael Dunne, president of Hong Kong-based Dunne & Co., which consults on the auto market in China and the rest of Asia.

“GM has the right products and very good momentum,” Dunne said.

The bankruptcy proceedings left GM with a strengthened balance sheet, and the carmaker has maintained market leadership in the U.S. and China. GM earned $6.17 billion last year, the most since 1997, and Chief Executive Officer Dan Akerson is hurrying new models, pushing for more electric-drive cars, and investing in Brazil and China.

GM even gained share in the first quarter in profitable U.S. pickup sales. Its Chevrolet Silverado and GMC Sierra increased deliveries in the first three months of the year by 30,418 — more than all of the Toyota Tundra pickups sold in those months. The Japanese automaker in 2007 approached its goal of selling 200,000 Tundras a year. In 2010, it sold 93,309.

GM’s 26 percent jump in U.S. sales in April exceeded the average of seven analysts’ estimates for a 14 percent boost. Toyota’s deliveries increased 1.3 percent, trailing the 1.4 percent average gain estimated by four analysts.

J.D. Power had predicted another tight race in 2011 after last year, when Toyota’s sales of 8.42 million vehicles exceeded GM’s by 30,000. Now GM is gaining, said Schuster, the J.D. Power forecaster.

Toyota has lost production of about 500,000 vehicles since the March 11 earthquake and tsunami in Japan, said Javier Moreno, a spokesman. Full output won’t return before November. GM has also boosted U.S. deliveries through March this year by 69,000 more than Toyota.

“Given the turmoil Toyota is in right now, GM is poised to take the No. 1 spot,” said Henner Lehne, global director of sales forecasting for research firm IHS Automotive. “In the near term, we have GM overtaking Toyota. It will be a battle over the next several years.”

GM, which last month revealed a redesigned Chevrolet Malibu in Shanghai and New York, needs to keep growing in China to stay ahead of Toyota and Volkswagen AG, he said. Wolfsburg, Germany- based Volkswagen also aspires to lead global sales, Lehne said.

Volkswagen, the world’s third-largest carmaker, aims to increase deliveries 5 percent in 2011 after reporting record sales of 7.2 million last year. Toyota said in December it expected to sell 8.37 million vehicles this year after delivering 8.42 million in 2010. GM, which sold 8.39 million vehicles last year, hasn’t given a 2011 target.

GM’s position in China is one reason analysts and investors say its stock may be poised to rise in the next year. While the shares have traded at or below the $33 initial public offering price since March 4, all 20 analysts surveyed by Bloomberg recommend buying or owning the stock.

GM rose 71 cents to $32.89 at 2:18 p.m. in New York Stock Exchange composite trading. The average price target of 14 analysts is $42.79. Toyota’s American depositary receipts, each representing two ordinary shares, fell 75 cents to $79.41 in New York. They’ve fallen 9.3 percent since March 10, the day before the earthquake.

Carmakers should be wary of the global sales title, said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan. GM boosted profit-eating incentives to keep its lead through 2007 and Toyota ran into quality problems after becoming No. 1, he said.

“Volkswagen wants to be the next GM just like Toyota did,” he said. “It’s not about market share and it’s not about size. It’s about producing the right number of cars to get higher pricing and profitability.”

VW has said it aims to surpass GM and Toyota with 10 million sales by 2018. Executives privately aim to meet the goal by 2015, a person with knowledge of the matter said in October.

VW last year reported the highest net margin among the five largest carmakers at 5.4 percent, according to Bloomberg data, and Ford Motor Co. (F) posted a 5.1 percent margin. GM was at 4.6 percent, while Toyota earned a 2.5 percent net margin in the calendar year. Toyota plans to report fiscal fourth-quarter profit May 11. GM reports its first-quarter results May 5.

“We’re focused on running a profitable global enterprise,” said Jim Cain, a GM spokesman. “So sales races aren’t important to us.”

GM and Volkswagen are also looking to win buyers from Toyota in segments such as family sedans. GM will begin selling the new Malibu in January to take on the Camry, the top-selling car in the U.S. VW will open a factory in Chattanooga, Tennessee, this year to boost volume of the midsize Passat. VW also slashed the base price from $28,000 to around $20,000 to take on Camry and Honda Motor Co.’s Accord.

The winner will be decided in China, the world’s largest national market, said Dunne, the consultant. GM and Volkswagen, whose joint ventures are the top sellers, have been introducing the more models for less than $10,000 that make up the fastest- growing segments. GM, like Honda and Nissan Motor Co., is starting a China-only brand of low-cost vehicles called Baojun.

GM and its Chinese joint venture partners will expand sales to 3.5 million by 2014 from 2.3 million last year, according to J.D. Power. VW will build its China sales to 2.8 million from 1.9 million, while Toyota deliveries are expected to grow to 1.2 million from 857,000, the company said.

“Toyota has been more conservative and methodical,” Dunne said. “Most of their growth has been where the Camry and larger Crown play. That’s the slowest-growing segment.”

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Treasury Boss Says U.S. Committed to Getting Out of Auto Business

DETROIT – U.S. Treasury Secretary Timothy Geithner told the Detroit Economic Club Thursday that the government remains committed to getting the bailed-out auto companies back in the hands of private control as soon as possible, while still balancing the need to get back as much of the taxpayers’ money as possible.

Geithner did admit that while the financial rescue program that saved banks and other parts of the financial system will make a profit, the government will lose money on the auto bailouts. However, he said the main focus of the financial aid to General Motors and Chrysler was to save jobs, reported The Detroit News.

“We try to balance two objectives: one is to get these companies back in private hands as quickly as we can … but we also want to recover as much of taxpayer money as possible, “Geithner said. “We didn’t do these things to maximize returns. We did them to save jobs.”

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GM CEO Says Discounts Helped Sell More Cars In 1Q

NEW YORK — General Motors Co. CEO Dan Akerson said he doesn’t regret the company’s decision to increase spending on rebates and other deals earlier this year even though it has contributed to the company’s tumbling stock price.

GM surprised the industry — and Wall Street — when it raised discounts by $400 per vehicle in January and February. Most automakers didn’t raise them because demand for new vehicles has been rising in line with supply, reported msnbc.com.

“I feel pretty good about that. I think we’re in pretty good shape,” Akerson said at an automotive conference Tuesday in New York.

Akerson said the increased incentives helped GM sell 100,000 more cars in the first quarter than it did in the same period last year. It also caught GM’s competition off-guard.

“I don’t want to be a predictable competitor,” Akerson said. “I don’t want the other guy to know exactly what I’m doing.”

GM pulled back on its incentives in March, spending $600 to $800 per vehicle less on the deals. But it was too late for some investors, who shied away from the company’s stock because higher rebates lower car companies’ profits.

GM’s stock fell 38 cents, or 1.3 percent, to close at $29.59 Tuesday after touching its lowest point since its November initial public offering. Tuesday’s closing price was10 percent below the company’s $33-per-share IPO. The stock opened the year at $37.32, but has fallen 21 percent since.

That could hurt the government’s effort to recoup the $50 billion it gave GM to survive. The U.S. government got back $13.5 billion from the sale of some of its shares in November’s IPO. But to break even, it needs to sell its remaining shares for $53 each. The government still owns a 26.5 percent stake — about 500 million shares — in GM.

Akerson said he hasn’t had discussions with the U.S. Treasury on when it might sell its remaining stake.

“They will tell us when they’re getting out. I will not tell them when they’re getting out, and I don’t know what’s going to go into their calculus,” he said.
Besides the rebates, GM’s stock has been hit by rising oil prices and concerns about parts shortages from Japan, Akerson said.

Akerson said that just after the IPO, GM’s management team told him that higher oil prices were the biggest threat to the company. GM then put a plan in place to counter the effect of higher gas prices, including moving up the release of the new, higher-mileage Chevolet Malibu by several months.

The Malibu, which is expected to get up to 35 miles per gallon, will come out early next year.

The Energy Information Administration predicts that retail gas prices could peak at $3.91 per gallon this summer.

GM believes the March 11 earthquake in Japan will have little effect on the company. Akerson, a former telecommunications executive, said relationships he forged in that field helped him identify alternate suppliers for some electronics parts, although the company hasn’t yet had to switch to new suppliers.

Investors also have expressed concern about management changes at the company. The most recent high-profile departure came April 1, when Chief Financial Officer Chris Liddell resigned after just 15 months with the company. Akerson also named a new product chief in January.

Akerson didn’t directly address the changes, but acknowledged that he has taken some heat.

“If I’d changed nothing at General Motors I would have gotten criticized. If I change anything I get criticized,” he said.

But Akerson said he has helped change the insular corporate culture at GM, encouraging executives to sit on the boards of companies outside the industry so they can learn other ways of doing business. He also said board meetings are more open than they used to be.

“I do think we have a more collegial, open debate and arguments. No one wants to leave the room angry. We want to solve the problem,” he said.

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U.S. Treasury Said To Wait For GM Results Before Decision On Selling Stake

The U.S. Treasury Department will wait for General Motors Co’s first-quarter earnings before deciding whether to sell more of its investment in the nation’s largest automaker, a person familiar with the matter said.

The Treasury can sell some of its remaining 500 million GM shares, which equals 33 percent ownership, starting May 22, Bloomberg reported. Officials are waiting for GM’s earnings and to see what happens to the stock when bondholders in GM’s bankrupt predecessor company receive shares as partial compensation for their losses, said the person, who didn’t want to be identified because the plans aren’t public.

GM has dropped 20 percent this year in New York trading and 10 percent from its initial public offering price. While the Treasury may be willing to take a loss on the shares, which closed today at $29.59, the Obama administration is looking to sell at least in the range of the $33 IPO price, the person said. The government would need to sell the shares at about $53 apiece to break even on the investment.

“They will tell us when they’re getting out; I will not tell them when they’re getting out,” Dan Akerson, GM’s chief executive officer, told reporters today at an industry forum in New York. “There are many variables in their consideration and they don’t share that with us. They’ll notify us when they want to position for the sale.”

Mark Paustenbach, a Treasury spokesman, declined to comment. GM hasn’t said when it will report first-quarter earnings.

GM fell 38 cents, or 1.3 percent, to $29.59 at 4:15 p.m. in New York Stock Exchange composite trading. The shares slid as much as 2.7 percent earlier to the lowest price since the IPO in November.

The Treasury may file to sell shares with a traditional S-1 filing after a lockup period expires on May 22. The Securities and Exchange Commission would then review the offering like an IPO, which would delay the actual sale until June, the person said.

If the department waits until July 1, the government would be able to sell the shares with a less-thorough review and could get the offering started more quickly. In that case, the Treasury likely would wait until Detroit-based GM reports second-quarter earnings before selling more stock, delaying the sale until August, the person said.

The Treasury may make a third offering of shares in November or December and doesn’t need to sell all of the shares this year, the person said.

The department’s auto task-force members haven’t met with Treasury Secretary Timothy F. Geithner, who would decide on any GM share sale, to discuss the timing of a possible secondary offering, the person said.

The Treasury, which owned 61 percent of GM after its 2009 bailout of the automaker, sold shares equal to a 28 percent stake during the IPO. In a January interview, Ron Bloom, who was head of the Obama administration’s auto-industry task force at the time of the IPO, said the government wanted to sell its GM shares “as soon as practical.”

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