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GM sees strong full year as profit motors past expectations

New pick-up trucks drive strong earnings as company steps up efforts to cut costs

GM chief executive Mary Barra told employees in an email: “Our structural costs are not aligned with the market realities.”

Wed Oct 31 2018 - 18:58

General Motors posted far higher-than-expected quarterly profit on Wednesday and said full-year earnings would come in at the high end of its forecast due to strong demand in North America, driven by its new pick-up trucks.

GM shares jumped nearly 9 per cent in afternoon trading.

As it posted the figures. the company stepped up efforts to cut costs in response to tariff and market pressures.

The leading US automaker said it was offering buyouts to salaried employees with 12 or more years of service, as chief executive Mary Barra told them in an email: "Our structural costs are not aligned with the market realities."

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GM was able to push through higher pricing, mostly in North America, allowing it to benefit by $1 billion in the quarter and offsetting higher commodity costs.

Sales of the Chevrolet Tahoe, Suburban and GMC Yukon large SUVs rose about 12 per cent, and the company increased production of the new Chevy Silverado and GMC Sierra full-size pickup trucks.

"Overall, the print should be a relief to the market today," RBC Capital Markets analyst Joseph Spak said in a research note.

The pricing gains are "absolutely sustainable," GM chief financial officer Dhivya Suryadevara said. "We had strong execution despite the challenges that we faced. Revenues up, profits up, margins up."

Slowing demand in China, the world's largest auto market, has begun to hurt the auto industry, but GM still was able to report record equity income in the quarter from its operations there.

GM reported third-quarter net income of $2.53 billion (€2.23 billion), or $1.75 a share, compared with a loss last year of $2.98 billion, or $2.03 a share. Last year’s quarter included a charge related to Europe.

Excluding one-time items, GM earned $1.87 a share in the third quarter, easily beating the $1.25 analysts polled by Refinitiv estimates had expected.

Revenue in the quarter rose 6.4 per cent to $35.8 billion, above the $34.85 billion analysts had expected. – Reuters

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