General Motors reported Wednesday a third-quarter profit that surpassed analysts’ estimates by more than 50 percent and said it wants to get back to financial break-even status in Europe by 2015.
Net income slipped to $1.83 billion from $2.1 billion a year earlier, Detroit-based GM said. Excluding one-time items, the profit was 93 cents a share, beating the 60-cent average estimate of 17 analysts surveyed by Bloomberg News.
GM had a strong performance globally “with the exception of Europe,” said Chief Financial Officer Dan Ammann.
The automaker, which has now lost $17.3 billion in Europe since 1999, said it will have a deficit of $1.5 billion to $1.8 billion this year in the region. GM said it expects “slightly better” results in 2013. GM posted a $1.82 billion profit before earnings and taxes in North America.
“This should be the global example of what restructurings look like: Cut 30 percent and bring your union contracts in line with today’s realities,” said Peter Nesvold, an analyst with Jefferies & Co., referring to North America. “It shows you how profitable these businesses can be.”
“What we’re starting to see is the benefit from the focus and discipline we’re bringing to the business,” Ammann told reporters on a conference call. “We’re continuing to make progress on tough situations in front of us, including the pension situation and making some modest headway in Europe.”
Ammann said GM will reveal more actions to improve its European operations.
“We’re obviously working on our cost and capacity reductions,” Ammann said.
The automaker is seeking a solution to its woes there through an alliance with Paris-based PSA Peugeot Citroen. GM and Peugeot said last week they would jointly develop small and mid-size cars, vans and utility vehicles, though they have yet to finalize details.
GM lost $478 million in Europe in the third quarter before interest and taxes, from an operating loss of $292 million a year earlier. GM’s struggling European operations have slid further as the region’s auto market has collapsed in a slow economy. Auto sales could drop to their lowest level in 19 years, according to an industry trade group called ACEA.
Ford Motor Co. said last week it plans to close three European factories and cut 6,200 jobs to achieve profitability in the region by mid-decade.
“GM is actually too small and too weak to do what Ford is doing,” said Adam Jonas, a Morgan Stanley auto analyst who last month estimated that GM’s European Opel unit has a value of negative $17 billion and “represents the single biggest threat to GM’s long term financial health and sustainability.”
GM also has said it plans to shutter its plant in Bochum, Germany, in 2016, the first car factory closing in that country since World War II.
To adjust to the market collapse, GM may have cut production in Europe by 16 percent, or 40,000 vehicles, in the third quarter, Jonas said. That would have lowered revenue because the automaker books sales when it sends vehicles to dealers.
Third-quarter revenue rose to $37.6 billion from $36.7 billion last year. The average estimate of eight analysts was for $35.9 billion.
In North America, GM’s $1.82 billion earnings before interest and taxes compares with a $2.2 billion profit last year. In the year’s first half, GM earned $3.66 billion in the region, up from $3.5 billion the year before.
GM’s U.S. car and light-truck sales are up 3.4 percent so far this year to 1.97 million vehicles, according to researcher Autodata Corp.
The average price U.S. consumers paid for a GM model fell less than 1 percent in the third quarter to $33,024, according to researcher Edmunds.com. The decline was caused by growing sales of new lower priced small cars such as the Buick Verano and Chevrolet Spark, said Edmunds analyst Ivan Drury.
GM’s average transaction prices in the U.S. have risen 21 percent since 2002 and 13 percent since 2007, according to Edmunds.
GM also provided an update on pension-buyout offers. About 30 percent of retirees offered pension buyouts took the lump-sum payout, the company said. Through annuitizations and lump-sum payments, about $29 billion of GM’s U.S. salaried pension liability is expected to be eliminated, compared with an original estimate of $26 billion, the automaker said.
GM offered buyouts to 42,000 pensioners, or about 36 percent of its salaried work force, who left from Oct. 1, 1997, to Dec. 1, 2011. Those who refuse the lump-sum buyouts have their pension plan shifted to a unit of Prudential Financial Inc. along with the plans of other retired U.S. salaried workers, a deal GM expects to close early next month.