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Europe drags surging GM down

2011-11-10 07:36

DETROIT, Michigan - Europe's economic woes are weighing on General Motors' profits.

The company's third-quarter net income fell 15% from a year earlier, the automaker announced on Wednesday - the day before it shows a raft of new products at the Dubai auto show in the United Arab Emirates - dragged down by losses in Europe and South America and weak earnings in all areas except North America and China.

GM said that its net income fell to $1.7 billion (R13.6 billion) in the quarter, compared with $2 billion (R16 billion) a year earlier. Still, it was GM's seventh-straight quarterly profit, and the lower numbers still beat Wall Street's expectations.

Revenue rose 7.6% to $36.7 billion (R293.6 billion). Analysts had expected $35.9 billion (R287.2 billion).

INTERNATIONAL OPERATIONS


GM posted a pretax loss of $292 million (R2.336 billion) in Europe as the economy struggled. Its profit rose slightly in North America, but earnings at its international operations, including China, fell 29% to $365 million (R2.92 billion).

Chief financial officer Dan Ammann said the company had a solid quarter but needs to improve its margin of profit in all regions.

In Europe, Ammann said the company has made significant progress and is more than $1 billion (R8 billion) ahead of last year's pretax earnings. But it still needs to take out costs across the board and put out the right products that people will buy, Ammann said.

GM said it would not break even in Europe this year because of deteriorating economic conditions there.

Ammann said the company has an aging car and truck portfolio in South America and is in the process of refreshing it. It also offered buyouts to employees that resulted in a 4 percent cut in the work force there, he said.

CRUZE HATCHBACK


To boost profits, GM is coming out with nine new vehicles in the next year in South America, including the Chevrolet Cruze compact and a subcompact named the Cobalt, the company said.

Ammann said the GM plans actions companywide to improve profit margins. Its profit margin is around 6%, a full percentage point lower than its closest global competitors, Volkswagen and Ford.

While the company plans to cut costs further, it mainly will boost profit margins by increasing revenue, he said.

"You can't cost-cut your way to prosperity in the business. You've got to grow the business, get the right vehicles on the road," he said.

AP