GM solidly trounced analysts’ expectations and delivered $3.2 billion if Q1 2011 net income. The consensus of a Bloomberg panel was $1.74 billion. Compared with the first quarter of 2010, revenue increased $4.7 billion to $36.2 billion, says GM press release. GM’s first-quarter profit more than tripled to its highest in at least 21 years.
About half of the glad tidings were not earned in the showroom. Says the communiqué:
“Net income attributable to common stockholders includes gains of $1.6 billion and $0.3 billion respectively related to the sales of the company’s ownership interest in Delphi Automotive LLP and Ally Financial Inc. preferred stock. It also includes a $0.4 billion goodwill impairment charge at GM Europe (GME) resulting from a change in accounting standards and charges totaling $0.1 billion at GM International Operations (GMIO) related to revised tax regulations affecting the company’s India joint venture. Combined, these special items increased net income attributable to common stockholders by $1.5 billion or $0.82 per fully-diluted share.”
However, even excluding these items, profit was 95 cents a share, topping the 91-cent average estimate of 13 analysts surveyed by Bloomberg.
GM is not breaking out how much money it made in its largest market China. The release only says that “GMIO reported EBIT of $0.5 billion compared with $0.9 billion in the first quarter of 2010. On an EBIT-adjusted basis, GMIO earned $0.6 billion in the first quarter, a decline of $0.3 billion compared with the first quarter of 2010.” GMIO stands for “GM International Operations.”
Speaking as a guy that depends on a GM Pension…Woooo Hooo!
good news no matter how we cut it. much remains to be done, but for today…Congrats to my friends at General Motors!
Outstanding. Ok naysayres. Bring it on. Fleet sales, Govt motors etc.
Oh, the naysayers are still there,but thier numbers are dwindling. Nothing is raining on my parade.
Got to cut the lawn,wash the car,and I just might have to crack a couple of cool ones to celebrate.
I’ll be doing the same tonight – cutting the grass, that is – and having a beer. Maybe there will be a new Impala in my future to look forward to after all!
I would not call myself a “naysayer” because I’m not close enough to the situation to know if there are extraordinary circumstances to explain this level of profitability. (I’ll trust the B&B to fill in these gaps throughout the day.) However, I am smart enough to realize that this level of profitability is entirely reasonable given the impact of the TARP bailouts and the buckets of taxpayer dollars that were GIVEN to GM (and Chrysler). This reason, and the general culture of arrogance that permeates GM that I DID get to see up close and personally, is why I will NEVER consider buying another GM product.
I find this story to be insightful as well: my wife and I will be purchasing a new vehicle in the next six months. My wife is not at all interested or in tune with the automotive industry, but she did say, “You know, I want to make sure we look at Ford products. I just like the fact that they didn’t take any bailout money.” I can’t imagine this sentiment is unique to my wife.
Isn’t it a “sunk cost fallacy” – to base your future decisions on past costs? What does buying/not buying of GM here and now has to do with the imaginary money the Government printed for GM?
Sorry, I don’t follow.
Rada,
You bring up a good and valid point if the decision is entirely rational. Unfortunately, emotions play a real role in decisions for us human critters. I would have a tough time reconciling my own feelings and experiences with GM over the years (including, but not limited to the bailout) in order for me to purchase their products. It’s not necessarily about punishing them, and I don’t wish them any ill will, but there are too many good choices in the marketplace that won’t leave me feeling as if I’ve sold out my principles. Thanks for the comment.
Tex
Yeah I’d show a great profit too if all my debts were flushed away and I was exempt from income tax in perpetuity. What financial geniuses they must be.
Not exempt from income tax for ever. Just until their accumulated losses have been “used up”. Same goes for Ford and other corporations.
Sorry GM couldn`t have made a big loss – then you could be happy.
This is not exactly true. GM did wipe away billions in debt with out tax money as part of the bailout. AND, good GM got to keep the tax writeoff from a large part of that debt.
So not only did they take out tax money in the bailout, they are now on the hook to pay less taxes in the future!
Like several folks already said, it’s easy to show a profit when you wipe all your debt with someone else’s money…
Highrpm – so what was untrue? I agree they received federal Government money (hence it being called a bailout). Is it true other corporations (including Ford) gain from this accounting rule about using accumulated losses to reduce income tax in the future?
They still pay employer taxes, they still employ people who pay taxes so it is still better that they make a $3B profit than say a loss. Means at the very least their accumulated losses will be burnt through quicker then they can pay taxes – would you be happy with that?
Not exactly a “level playing field” compared to other more historically responsible automakers.
I’m assuming you’re talking about Chrysler?
or Volvo? or Saab?
AMC?
DeLorean, or Bricklin?
DeTomaso, or Avanti?
Which historicals are you referencing? It’s not clear.
No. You’re wrong. When companies declare bankruptcy, they FORFEIT the ability to carry over their accumulated losses. Unless you get a special “Government Motors” deal like GM.
Other companies (Ford et al) get to carry over their losses, but they didn’t declare BK.
GM got special treatment…treatment that other companies that declare BK in the USA didn’t receive.
not making a call – good or bad – on the quarter. The market can do that on its own over time. But those that care should be looking at the adjusted EBIT numbers by region to get a better feel for the quarter. Adjusted EBIT of $2.0 bn v $1.7 bn in 1Q10 takes out the $1.6 bn gain from the sale of the Delphi stake and the $300 mn from Ally. Make your own call on good (buy more stock), bad (short it) or indifferent (do neither and comment on the forums)
As someone takes an interest in these things – I’m more concerned with the risks than the cheerleading or “I told you so” to naysayers – MANY analyst questions on the call were about GMNA pricing and the ability (or inability) to offset higher commodity and structural costs in the second half of the year with higher net pricing. Many factors will play into this – one of the keys as I see it is mix – fuel prices and already high inventory of trucks will make it difficult to improve net pricing on that side of the business later in the year. Better pricing on cars may not give the bang for the buck that trucks would. I’d be watching the mix & cost factors over the next quarters.
The other thing that concerns me is the equity income from GMIO. Total GMIO adjusted EBIT was $500 mn (down from $900 mn a year ago). The equity income was $400 mn – flat yoy. All we hear is how the sun rises and sets over China. GMIO deliveries were up 65,000 units yoy. GM reports 100% of JV deliveries, none of the revenue and equity income equal to the stake in the JV. So my point is, yay! volume, but the consolidated income is only a percentage of total adjusted ebit for the company. GMIO, GME and GMSA COMBINED for $600 mn of $2.0 bn in adjusted EBIT. That makes GM still VERY profit dependent on GMNA. Which is all well and good since this market is recovering nicely. But it IS a mature market with intense competition. I’m not concerned about the walk from 11 million units back to 15. The real tests will come as the next plateau (is it 15, 16 , 17 million) comes and the rising tide is not lifting all ships anymore.
But all in, this is good. Hopefully any GM stuff I own is worth more today – I mean vehicles – the stock is down as of now.
Thanks for sharing your thoughts. I too thought the GMIO numbers were interesting. I wasn’t up early enough to get on the analyst call, so I’m waiting for it to go to replay…
It’s interesting that the questions were about NA market net pricing though, when the quarter saw one of the lowest monthly retail market share numbers in company history. I’m guessing the fact that the March-April retail drop coincided with GM going under the industry incentive average is what’s making the pricing picture so scary… although April does seem to be bucking the trend, with incentives under the average and retail share rising. This seems to jive with the emerging Japanese supply constraints… now is probably the best time for GM to have pricing issues (and bust them, rather than loading up on volume during the supply interruptions) in years.
Another interesting note from the NA market share slide: the high-incentives months of Dec/Jan/Feb saw the smallest gaps between market share and retail market share. In other words, when incentives are up, fleet sales are down… by going back and forth between the two, GM can apparently make a hefty profit.
Is it really interesting that when GM increases incentives for retail customers retail sales increase? Pretty much the reason for the incentives is to get retail customers – they also I expect have visibility of large fleet orders month’s ahead and that factors into their timings. Sorry if snippy but….
keep in mind – the questions from analysts will be forward-looking. The quarter is old news. All that is priced in the stock already and is really of no interest. The questions were about cost inflation over the second half of the year and how GM will offset that. GMs answer was 1)better net pricing and 2) supplier efficiency. The constant GMNA cost questions were a clue the analysts didn’t really buy the case – obviously not enough to downgrade the stock (since there is still 33% of the government’s stock that will need placing over the next several quarters). But the 3% drop today is a pretty decent clue of what the “smart money” thinks and is telling clients.
I wouldn’t be worried about the commodity pricing because everyone is having to deal with that right now. If they aren’t dealing with that, they are dealing with exchange rate problems.
All mfg will deal with higher inputs – but not all companies have the same operating margins and cost structures. So the question becomes where to offset the increases. A firm will either take costs out somewhere else or find a way to pass on higher prices to customers. They are all playing the same game, but not with the same playbook. I understand it is difficult to interpret tone from a forum posting and perhaps your reply wasn’t meant to be as casual as I read it, but if I have a vested interest in the performance of the firm, I’d rather see management “worried” about raw mats than telling shareholders – “don’t worry about it. Everyone is in the same boat”. In my opinion, if this is the “NEW” GM, it should be managed with a sense of urgency that I thought was missing previously.
I will stay away from the “bailout” argument for the time being.
But this isn’t new for GM, i.e. posting quarterly profit just to make the executives richer and look good, until the next big “one time” loss hit.
Don’t believe me? Just look at GM’s market share. It has never gone up on a full year basis, since … ever.
A company like GM is destined to lose money if it cannot stop the market share loss.
Not buying the market share bit. Google BMW’s most recent results for confirmation. What matters is making and selling good cars. These generate margins instead of rebates. Of course, if GM started selling better cars, their share might also increase. But market share is not the cause, it’s the effect.
BMW is selling EXPENSIVE cars and hires fewer people. Even though BMW has a small total market share, that share itself isn’t shrinking like GM’s.
Theoretically, you can grow your profit even when your market share is going down, by:
1) Going up market
2) Laying off people
Neither option is available to GM.
Since GM is so successful, let’s have them buy back some stock from the government. How much does the US Treasury hold?
Last I heard, the plan was for Treasury to sell large pieces of stock this Summer, netting a loss for the taxpayers.
GM fans, please hold your applause until the those of us who won’t buy GM products see money returned to the government to be wasted on other programs. Still, congrats on the good news.
Good for GM!
While Ford has been getting pretty much all the kudos lately, it’s interesting to note that one of the areas that Ford is weakest (sales in the fast growing BRIC auto markets – esp. China) is where GM has done really well.
And as for all the talk about how Ford didn’t need bailout $$, they were fortuitous in being able to hock themselves to the hilt before the credit market froze; if they had delayed, they would have been in the exact same shape as GM and Chrysler.
Also, w/o the bailouts, the suppliers supplying GM and Chrysler would have gone under and many of them also supply Ford which would have eventually sent Ford over the edge as well.
And then there’s Ford Credit …so it’s not so black and white.
Sorry, bd2, but I’ve got to call “bull” on your entire premise! There is a whole lot of “if, then” in your response. The fact is that Ford made decisions and took actions WITHOUT using bailout money and you want to hold it against them! And you KNOW for a fact that “the suppliers supplying GM and Chrysler would have gone under……”. If I could predict the future, as you evidently can, I’d go all in on the next lottery. Please stick to facts and try not to spin scenarios to make it appear as though GM were dealt some bad luck and Ford just got lucky.
“Also, w/o the bailouts, the suppliers supplying GM and Chrysler would have gone under and many of them also supply Ford which would have eventually sent Ford over the edge as well.”
No. Simply not true.
If GM/Chrysler went under, there would be a flood of investment money going to Ford, helping it overcame the part shortage. And as the only American auto maker remaining, Ford would pay back that investment in no time once recovery starts (as of now).
If you are a bailout apologist, read this:
http://www.nationalaffairs.com/publications/detail/the-auto-bailout-and-the-rule-of-law
Read it with an open mind and get back to me if you learned something from it. And admit that those of us who are anti-bailout have many very valid arguements.
Living in metro Detroit obviously I’m glad GM & Chrysler got bailed out. I still think the end result will prove the government made a financially wise decision to keep both companies in business. Don’t forget what the state of the entire economy was at the time of the bailouts and what effect both companies going under would have had.
I completely understand the opinions of those that remain opposed to the bailouts but I also vehemently disagree with that stance. The bailouts had an enormous positive effect on our local economy and I am a beneficiary of that.
Oh…so the taxpayers aren’t going to lose any money on this bailout then??
Let me know when (if?) that happens…
I honestly don’t think the taxpayers will lose any money on the GM & Chrysler bailouts. Considering how well both companies are doing in the short amount of time it has been since the bailouts IMO both will repay the government in full.
Given the massive cost to the government if both had failed and the disastrous effect it would have had on the economy I firmly believe the government made the right decision. I certainly do not think this country would be better off today had both companies failed and I doubt even those opposed to the bailouts think it would.
It is one thing to be philosophically opposed to the bailouts on principle and post such here. It is quite another to live in a region that is highly dependent on both companies’ survival for its own economic survival. I will go so far as to state anyone that thinks this country would have been better off had both companies failed is guilty of delusional thinking at best.
“I honestly don’t think the taxpayers will lose any money on the GM & Chrysler bailouts.”
“I will go so far as to state anyone that thinks this country would have been better off had both companies failed is guilty of delusional thinking at best.”
So you’re aware of the concept of delusional thinking. You’ve got my vote for the Irony World Championship.
This is an argument that will never end, those opposed to the bailouts vs. those in favor. Time will tell if I am correct in my assertion that the government will be fully repaid. Even the most ardent anti-bailout proponent can’t dismiss the current financial performance of either company.
It is really as simple as this, are we better off with GM & Chrysler prospering or would we have been better off if they did not exist? If your response is we would be better off if they didn’t exist please explain how the economy would now be stronger under those circumstances. I don’t expect you to reply because quite simply there is no rational argument that could support that theory.
All I can do is reiterate my strong approval of the bailouts as I have both witnessed and economically benefited from them.
Remember your thoughts on the subject when the government is repaid in full. Also consider if both companies had failed what the effect would have been on suppliers. IMO what is truly incomprehensible is what the overall effect on the economy (the worst since the Great Depression) would have been had both companies been allowed to fail.
From just a purely economic standpoint the bailouts were a necessary evil in the same vein the bank bailouts were. This country’s economy couldn’t withstand either the banks or two of the domestic automakers going belly up.