European losses weigh down GM profits
General Motors reported lower third-quarter earnings, earning solid profits in its strong US business, but weighed down by widening losses in Europe.
The Detroit-based carmaker reported net income of $.1.5bn, or 89 cents per share, compared with net income of $1.7bn or $1.03 per share in the same quarter a year ago. The results beat forecasts of analysts polled by Thomson Reuters of 60 cents per share.
GM's loss before interest, taxation and amortisation in Europe, where it is restructuring its Opel/ Vauxhall business and joining forces with French rival PSA Peugeot Citroën , was $500m, compared with $300m a year ago.
The carmaker said it expected to report an EBIT-adjusted loss in Europe for the full year of $1.5bn to $1.8bn, "depending on the level of restructuring activity in the fourth quarter". GM said it expected a slightly better result in the region in 2013, and that it aimed to break even in Europe by mid-decade.
The company also said that it expected to take a $2.9bn pre-tax charge on its fourth-quarter earnings as a special item to reflect cash contributions of about $2.6bn it expected to make to its pension plan.
GM is converting some of its salaried retirees' pension benefits into lump sums, a move that GM said would reduce its pension liability by about $29bn, compared with its original estimate of $26bn.
In GM's core North American market, where the carmaker benefited from a sales windfall last year due to Japanese carmakers' supply problems, the company reported lower quarterly EBIT of $1.8bn, down from $2.2bn a year ago.
GM's international operations, which include its profitable China business, reported EBIT of $700m, up from $400m a year ago. In South America, where GM faces intense competition from new entrants to the Brazilian market, the company reported EBIT of $100m, compared with near break-even results a year ago.
Dan Akerson, chief executive, described GM's results as solid, and said the carmaker was "seeing green shoots take hold on tough issues like complexity reduction, pensions and Europe".