GM Record Pre-tax Profits In North AmericaGM) has reported that in the third quarter operating earnings jumped 37% to a record $3.1 billion dollars. This record beating jump in operating earnings was driven by increased demand for trucks in the U.S., and good results in China. However, on the other hand, during the third quarter GM saw its net income fall 1.4% to $1.36 billion. The fall in its net income was driven by one-time big charges related to last years' ignition-switch recall scandal. When you exclude those one-time charges, their net income came in at $1.50/share, exceeding Wall Street analyst estimates of $1.18/share.
GM revenues for the third quarter declined 1% to $38.84 billion due to unfavorable exchange rate moves.
On the other hand, the company reported a larger loss in its South American unit than it reported last year. During the third quarter GM lost $217 million compared to $32 million in the same quarter last year. The company is experiencing difficult economic headwinds in Brazil and Chile, which is leading to sales declining in these two key markets for the company. The company is being hurt by the inflationary environment in South America. The company was able to offset some of these problems with higher prices and good sales on some new higher-priced products.
The company's international units, which includes its huge operations in China, earned $269 million dollars in the third quarter. The results includes the $500 million dollar income from the company's joint venture in China. GM's net profit margin from its joint venture in China was 9.8% in the third quarter. This was due to higher demand from GM's SUVs in China. Higher growth and profits from China offset the company's lower sale volumes from India and Africa.
During the third quarter the company's in house financial unit reported profits of $231 million dollars, compared to $205 million in the same quarter last year. GM Financial saw record net revenues of $1.7 billion in the third quarter due to more U.S. dealerships using the company's financing service. The company's credit performance was stable in the third quarter with only loses of 2%.
The scandal with ignition switches led to GM's stock tanking, and spending the bulk of last year stagnant. GM is moving beyond the scandal and has more than $20 billion in cash on its balance sheet at the end of the third quarter. The company has another $12.2 billion in available credit facility, giving GM a total liquidity of about $34 billion dollars compared to $9.2 billion in debt. The company has come along way from the financial crisis and the bailouts it got in 2009. GM has learned their lesson on over leveraging their balance sheet. The company has two times more cash than debt and could pay off nearly all of their debt with five years worth of their operating earnings. Current debt stands at 5.5x its operating earnings and 4.5x its pretax earnings. GM has a strong balance sheet, lots of cash, and a large buyback plan in place. This all adds up to GM being a great long-term investment.
Published on Oct 29, 2015By Cody Eustice
Posted in ...Market Commentary