DETROIT (AP) — High costs and falling sales in Europe weighed on General Motors’ first-quarter profit.
The world’s largest carmaker earned less than third of what it took in a year earlier, even with a big profit from its bedrock market in North America.
Troubles in Europe hurt the company during the first three months of the year. The region likely has fallen into recession, hit by huge public debts, austerity measures and rising unemployment. And GM’s costs in Europe are high because it has too many factories and employees. Union contracts and laws make it difficult to save money by firing workers and shutting down plants.
GM said Thursday it earned $1 billion, or 60 cents per share, in the quarter. That compared with $3.2 billion, or $1.77 per share, a year earlier, when earnings were boosted by the sale of GM’s stake in a parts company.
North America clearly is pulling the company along. GM earned a combined $1.7 billion before taxes in the U.S., Canada and Mexico. Sales rose by 19,000 vehicles to 703,000, and the company got higher prices for cars and trucks.
But even with that strong performance, GM gave a cautious outlook for North America. It predicted that results from April through September would be similar to the first quarter. That’s because it will temporarily close its U.S. pickup truck factories to prep them for a new model that comes out next year.
In Europe, GM lost $256 million before taxes, and it took a $590 million charge because of a change in pension values.
“The U.S. economic recovery, record demand for GM vehicles in China and the global growth of the Chevrolet brand helped deliver solid earnings for General Motors,” Dan Akerson, chairman and CEO, said in a statement. “Europe remains a work in progress.”
Chief Financial Officer Dan Ammann wouldn’t predict when Europe would return to profitability, and he said there won’t be any “big bang” moves to get there.
“It’s an ongoing set of actions,” he said.
GM’s struggles in Europe reflect the region’s economic troubles. Other automakers, including Ford Motor Co., also are losing money there.
Economists think the 17 countries that use the euro are already in a recession. Output is expected to have shrunk slightly in the first quarter after a 0.3 percent decline in the final three months of 2011. Two quarters of falling output is a common definition of recession.
Unemployment is 10.9 percent in the euro countries, the highest since the currency was introduced in 1999, and that figure masks an even worse situation in Southern Europe. Spain and Italy are struggling with shrinking economies and budget woes, while Greece, Portugal and Ireland have needed bailout loans from the other eurozone countries and the International Monetary Fund.
Besides North America, there were other bright spots for GM. The carmaker earned $83 million in South America, helped by new models for the region. The company earned $529 million pretax in Asia.
There were some signs of trouble in the U.S. Its share of sales fell by 1.2 percentage points in the first quarter to 14.3 percent. The company’s share of the global market dropped 0.1 percentage points to 11.3 percent.
Excluding one-time charges, GM earned 93 cents per share from January through March. That soundly beat Wall Street estimates. Analysts had forecast 85 cents on revenue of $37.9 billion, according to FactSet.
GM’s stock price fell 53 cents, or 2.3 percent, to $22.40 in morning trading.
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