GM abandons Europe breakeven goal after Q3 profit drops
DETROIT -- General Motors Co. posted a third-quarter profit that fell 15 percent after a loss in Europe and forecast that operating profit in the current quarter would be flat from a weak fourth quarter in 2010.
The automaker backed away from its full-year breakeven target in Europe due to deteriorating conditions in the region.
GM has "significant macroeconomic challenges" to address in Europe, Chief Financial Officer Dan Ammann told reporters today after the automaker reported a third-quarter net profit of $1.7 billion, compared with $2 billion in the year earlier period.
It was GM's seventh straight quarterly profit since exiting bankruptcy in July 2009. Strength in North America and China tempered losses in Europe and South America during the quarter.
GM CEO Dan Akerson said the company is not performing well enough. "GM delivered a solid quarter thanks to our leadership positions in North America and China. But solid isn't good enough, even in a tough global economy. Our overall results underscore the work we have to do to leverage our scale and further improve our margins everywhere we do business."
Akerson said GM needed to improve its profit margins, which were 6 percent in the third quarter, down from 6.7 percent last year.
"We know that there's more work left to be done," Akerson said. "We need to do a better job in Europe and South America. The results there are not sustainable and not acceptable."
Global revenue rose to $36.7 billion from $34.1 billion. GM said it ended the quarter with automotive liquidity of $38.8 billion.
Europe loss reduced
GM reduced its European loss to $292 million from $559 million in the third quarter of 2010. The automaker had expected to break even in Europe this year before restructuring costs, a level it achieved through the first nine months.
Ammann said in Europe is "very much focused on getting the break even point down further so we can get to a point where we're sustainably profitable."
GM sold 407,000 vehicles in its European markets during the third quarter, up from 389,000 the year before. Opel/Vauxhall sales grew to 279,000 from 273,000. Chevrolet's European sales increased to 127,000 from 115,000.
On Monday, GM said its European chief Nick Reilly would retire on January 1 after 37 years with the company. He will be succeeded by Karl-Friedrich Stracke, CEO of Opel/Vauxhall, a role Stracke will retain.
North America, China
In the third quarter GM's profits in North America rose 3 percent to $2.2 billion.
Profits at GM's international division, which includes China, fell 29 percent to $365 million. Ammann said earnings in China were up, but unfavorable exchange rates in other markets curbed profits.
Globally, better pricing helped GM during the quarter, although a shift in mix toward less-profitable smaller cars pinched profits, Ammann said.
GM lost $44 million in South America during the quarter after posting steady profits of around $100 million or $200 million there in recent quarters. In the third quarter of 2010, GM had posted South American profits of $163 million.
Akerson said GM has cut about 4 percent of its hourly and salaried jobs in Brazil during the current quarter and more cuts will be made. He said results in South America could be weaker in the fourth quarter.
Reuters and Bloomberg contributed to this report