U.S automaker General Motors said its first-quarter earnings slumped and revenue fell from the same quarter last year as the company continued to lose money selling autos in North America and was hit by a loss in its financial arm's residential business.
Even on an operating basis, GM's profit was sharply below market expectations.
The $305 million overall loss at finance arm GMAC "pretty much accounts for any difference in (earnings expectations)," GM Chairman and CEO Rick Wagoner told CNBC's Phil LeBeau.
"What we had is a huge negative hit in the residential mortgage business and that really accounted for (GMAC's) loss," Wagoner said Thursday. The residential capital unit lost $910 million in the first quarter, hit hard by troubles in subprime lending. GM now owns 49% of GMAC.
The Dow component reported net profit of $62 million, or 11 cents a share, for the first quarter, down from a profit of $602 million, or $1.06 a share, in the same quarter a year ago. Revenues fell to $43.9 billion from $52.4 billion in the year-ago period.
Excluding one-time items, earnings were $94 million, or 17 cents a share, compared to $350 million or 62 cents a share in the same quarter a year ago.
The operating profit was well below what Wall Street was expecting. Analysts surveyed by Thomson Financial predicted earnings of 87 cents a share on revenues of $40.88 billion.
GM also lost $46 million in its North American business in the quarter, narrower than the year-ago quarterly loss of $292 million.
“We’re basically running at a breakeven level,” Wagoner told LeBeau. “I think it reflects a couple things. The relatively weak market we’re selling into, particularly on the retail side, although retail sales were up a little in the first quarter. We cut back a lot of low-profit business – fleet and daily rentals – and those were one-time cutbacks that we needed to do.”
Wagoner also said that the company has to focus on even more cost reduction and was confident an agreement with the United Auto Workers could be reached to achieve more savings.
“One never knows how these things play out,” Wagoner said. “If you look back over the last couple years, we’ve taken on some tough issues with the union. It hasn’t been easy to get some of this progress, but in the end we made the progress. In the end, I believe we’re going to continue to work together to do what’s right both for the company and for our workforce.”
On Tuesday, GM posted weakening sales results for April 2007, compared with the same period last year, with North American sales falling 9.5%, due to weaker demand, a slowing economy and rising fuel prices.
GM, along with other big U.S. automakers such as Ford and DaimlerChrysler's Chrysler, have been losing market share to foreign competitors over recent years.
In April Toyota Motor announced sales figures of 2.35 million vehicles worldwide in the January-March period, which beat GM’s 2.26 million vehicles sold in the same quarter, according to preliminary figures.
The figures marked the loss of the GM’s top stop to Toyota in terms of worldwide sales, however the full-year comparisons are yet to be seen. Toyota also felt the pinch due to slowing U.S. consumer spending, as it posted monthly U.S. sales down for the first time in two years for April.