North American sales drive GM to $1.48 billion profit

USA Today

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General Motors' reported third-quarter earnings of $1.48 billion, or about 89 cents per share, this morning as robust profits in North America more than offset continuing losses in Europe.

The quarter's results were a decline of 15% from $1.7 billion, or $1.03 per share a year ago. But excluding special items, earnings per share were 93 cents and that blew past Wall Street expectations of 60 cents,

Net revenue was $37.6 billion vs. $36.7 billion a year ago, about $2 billion more than expected, driven by both volume and higher pricing. Through three quarters this year GM has increased in North America both sales (up 3.5% year over year) and average transaction price (up 0.6%), according to Edmunds.com data.

GM's International unit, which includes China, posted an operational profit up 89% to $689 million and the South American unit turned to a profit of $114 million from a loss of $44 million a year ago.

"GM had a solid quarter because customers around the world love our new vehicles and we're also seeing green shoots take hold on tough issues like complexity reduction, pensions and Europe," said CEO Dan Akerson in a statement.

GM's quarterly loss was $478 million in Europe, where new-car sales are headed for their weakest year in about two decades and GM's Opel operation there already has gone more than a decade without a profit. The loss in Europe a year ago was $292 million.

GM now estimates its total loss in Europe this year will be $1.5 billion to $1.8 billion. It sees 2013 as being "slightly better" and sees breaking even in Europe "mid-decade."

Analysts will be looking for more details on GM's plans to restructure in Europe. Ford last week announced plans to close three plants there, as it said its losses in Europe this year will be $1,5 billion.

With the presidential election less than a week a weigh, both sides are likely to try to use GM's report to continue their debate over the administration's 2009 auto bailout and bankruptcy restructuring.

But Jessica Caldwell, Edmunds.com' senior. analyst, says the thrid quarter provide little to chew on. "GM's quarterly earnings will be scrutinized more closely than usual ...," she says. "But anyone looking for political artillery in these numbers will likely be disappointed. General Motors' global performance is hardly out of line with any other automaker, whether it's the company's strength in the North American market, or its weakness in the European market."

The U.S. government still owns 32% GM's common stock. Romney has said he would immediately sell the government's GM shares. Obama's Treasury Department officials have said they want to sell, but not until the price is right.

GM's stock closed Friday at $23.28, the last day of trading on the New York Stock Exchange before it was shut down because of Hurricane Sandy. That's down 29.5% from its initial public offering in November 2010, and at that price the U.S. government would lose more than $15 billion on the $49.5 billion the Bush and Obama administrations provided the company.

The European economic crisis has hit all automakers in the region. GM's European plants are operating at 70% of their production capacity, according to Jefferies & Co. analyst Peter Nesvold.

GM has formed an alliance with PSA Peugeot Citroen, buying a 7% stake in the struggling French automaker. The partners expect to save $2 billion a year within five years by coordinating development of four vehicles to be sold starting in 2016 by PSA as Peugeots and Citroens and by GM as Opels and Vauxhalls and through combined purchasing power.

Last week Ford announced it would close assembly plants in Belgium and Britain. GM is talking with German labor unions about closing a plant in Bochum after 2016.

Regarding its effort to cut its huge pension obligations with a buyout plan for salaried retirees, GM said about 30% of eligible recipients accepted the offer. Those who didn't accept the deal had their pension payments transferred to Prudential Insurance, which annualized the payments.

GM said that because of the deal, it would contribute $2.6 billion in cash in the fourth quarter to its salaried pension obligations in the fourth quarter, smaller than its previously projected $3.5 billion to $4.5 billion. It will also record a pre-tax charge of $2.9 billion, compared to a previous estimate of $2.5 billion to $3.5 billion.

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