DETROIT — It wasn’t long ago that a first-quarter profit of $3.2 billion would have been cause for a major celebration at General Motors.þþBut after G.M. reported those earnings on Thursday, the assessment from company executives and industry analysts was that the nation’s biggest carmaker could still perform much better.þþ“We are certainly holding ourselves to a higher standard,” Dan Ammann, G.M.’s chief financial officer, said in an interview. “We expect improvements.”þþThe company’s profit was more than triple what it achieved in the same period a year ago, and its fifth consecutive profitable quarter.þþHowever, without one-time gains from the sale of two assets, profits totaled about $1.7 billion, considerably less than the $2.5 billion that its rival, the Ford Motor Company, earned on lower volumes in the quarter.þþAnd despite marked improvements in its North American operations, G.M. is still trying to fine-tune its cost structure, product mix and incentive spending in its home market.þþ“North American auto profit was the biggest disappointment of the quarter,” Adam Jones, an analyst with Morgan Stanley, said in a research note.þþG.M. reported a $2.9 billion profit before taxes in North America, but that figure dropped to $1.3 billion when special items were excluded, including the sale of its ownership in Delphi Automotive and preferred stock it held in Ally Financial. The company said it expected better results the rest of the year by getting higher prices for its new models and further reducing its fixed costs.þþ“I would describe the first quarter as steady progress, but we have more work to do,” Dan Akerson, G.M.’s chief executive, told analysts in a conference call.þþConsidering that just two years ago G.M. was entering government-sponsored bankruptcy, the company has made big strides with a cleaner balance sheet and an almost entirely new management team.þþIt reported a 15 percent increase in worldwide revenue in the first quarter, to $36.2 billion, and a global market share of more than 11 percent. In the United States, G.M. vehicle sales have risen 25 percent during the first four months of the year, compared to a 20 percent increase for the overall market.þþBut the company also had the highest incentive spending — the discounts and special offers used to attract buyers — of any major automaker since the beginning of the year. And despite the success of new fuel-efficient models like the Chevrolet Cruze, G.M. still had more than a 100-day supply of trucks at the end of April.þþAnalysts said incentives had been falling for both G.M. and the industry over all, and would most likely continue to do so as G.M. benefited from product shortages by Japanese automakers slowed by the March 11 earthquake. “Even though the company spent more on incentives this year, we see this as a temporary situation,” said Jesse Toprak, an analyst at the auto research Web site TrueCar.com.þþMr. Ammann said G.M. wass closely monitoring its truck inventories to better match supply with demand. He added that the company was intent on cutting costs in its product development process by reducing the complexity of vehicles in the design and engineering stages.þþ“This is a process that will evolve over the next few years, not the next couple of quarters,” he said.þþG.M. is not planning any major cost cuts either in personnel or manufacturing facilities, he said. Currently, the company’s North American plants are running at nearly 100 percent capacity.þþ“We’re looking at inventories very carefully to make sure that we don’t overproduce,” he said.þþThe company is also struggling in its overseas operations. Pretax earnings in South America fell to $100 million, from $300 million a year earlier. Its international division, which includes China and other Asian markets, reported $500 million in pretax earnings compared to $900 million in the first quarter of 2010.þþEurope continues to be a trouble spot. G.M. lost $400 million in the quarter, most of it attributed to a one-time restructuring charge. The company said it hoped to break even in Europe for the year.þþOver all, investors were disappointed in G.M.’s results. The company’s stock fell $1.02, or about 3 percent, to $32.02 in trading on Thursday.þþThe stock’s future performance will have an impact on how soon the Treasury Department decides to sell more of its nearly 26 percent stake in the automaker.þþThe federal government will be permitted to sell some or all of its remaining 500 million G.M. shares beginning on May 22 — the day its lock-up period expires after last fall’s initial public offering.þþOne factor that will be watched closely are contract talks with the United Automobile Workers, coming soon.þþMr. Akerson said regular meetings continued with the union, but formal negotiations would not begin until this summer. The U.A.W.’s current four-year contracts with G.M., Ford and Chrysler expire in mid-September.þþ“We have a joint vested interest in making this a negotiations plus rather than a negative,” Mr. Akerson said of discussions with the U.A.W. “It’s critically important to both of us that we stay competitive,” not only with domestic competitors “but with the foreign transplants as well.”
Source: NY Times
