General Motors Co. is pointing to its European operations as a trouble spot as it reports lower earnings, and CFO Dann Ammann says the company "obviously [has] significant macroeconomic challenges to address there."
The carmaker's Q3 profit slid to $1.73 billion, or $1.03 a share, from $1.96 billion, or $1.20 a share, although it still beat the 94-cent average of analysts polled by Bloomberg News. Revenues scored a rise of $2.6 billion in the quarter, to $36.7 billion.
As the company was watching its stock price slide 8.1% in the morning, to $23.01, Ammann told a briefing with reporters in Detroit: "We've got good product and are well positioned in the marketplace. It's about getting paid for that product; it's about optimizing our mix of retail versus fleet sales."
But GM's European operations lost $292 million, before interest and taxes in the quarter, and the company said now doesn't expect to break even on an Ebit basis before restructuring costs in Europe, its prior goal. It cited "deteriorating economic conditions."
GM's overall Q4 results will be similar to a year earlier, when profit was 31 cents a share, it said, citing seasonal factors in North America and weakness in Europe. Bloomberg's tally of analysts showed that they were predicting 86 cents for the Dec. 30 quarter.
'Worse than Expected'
"We were worried about a Q4 guide-down relative to consensus, but this outlook appears worse than our own below-consensus estimates," Itay Michaeli, a New York-based analyst for Citigroup, said in a note to clients quoted by Bloomberg. "The weaker Q4 outlook will likely dominate attention today."
One year after its initial public offering that followed its 2009 bankruptcy, GM is closing in on regaining the lead this year in global auto sales, despite the European problems. Worldwide sales climbed to 6.79 million this year through Sept. 30, exceeding Volkswagen AG's 6.16 million and Toyota Motor Corp.'s 5.77 million, according to data compiled by Bloomberg.
GM increased production in North America as U.S. deliveries climbed 15 percent from a year earlier in the three months ended Sept. 30, Autodata Corp. numbers showed. CEO Dan Akerson has raised prices to offset higher costs for commodities and engineering as demand in GM's most profitable market recovers from a 27-year low.
North America Earnings Up
"In the face of a lot of headwinds from the global economy, GM continues to do pretty well," Channing Smith, a money manager at Capital Advisors in Tulsa, told Bloomberg before the earnings report. It manages about $900 million and holds GM shares. Smith added that consumers in the U.S. "are going to have to start buying cars again because the average age of cars on the road is very high, and fortunately GM has the right products now."
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