Berliner Boersenzeitung - Strong auto prices lift GM results as it eyes China revamp

The big US automaker lifted some of its full-year profit projections as it reported better-than-expected third-quarter results, boosting shares.

"I'm proud that GM is delivering our best vehicles ever with strong financial results. But I want to be clear that we are not mistaking progress for winning," Chief Executive Mary Barra said in a letter to shareholders.

"Competition is fierce, and the regulatory environment will keep getting tougher."

GM reported $3.1 billion in third-quarter profits, essentially flat with the year-ago period.

Revenues jumped 10.5 percent to $48.8 billion despite an 8.8 percent drop in global auto deliveries that reflected lower sales across GM's markets.

GM's operating earnings were once again dominated by North America, where the automaker has pointed to reboots of popular sport utility vehicles and trucks employing internal combustion engines (ICE) -- larger vehicles with big profit margins.

GM has for months cautioned investors that it expects a moderation in strong pricing as vehicle supply rises. But chief financial officer Paul Jacobson told reporters on a conference call the company has yet to see deterioration in pricing.

GM's strategy has been based on maintaining strong profitability from conventional vehicles in order to finance billions of dollars in new capital projects for electrical vehicles (EV).

In the third quarter, GM attained about 10 percent of the US market share for EVs following the launch of the Chevrolet Equinox. GM plans additional new EV offerings in 2025, with expectations that it will get closer to overall EV profitability through economies of scale.

Jacobson has said GM expects to lose between $2 and $4 billion less on EVs over the next year as it ramps production. On Tuesday, he said about one third of the company's capital program still goes to ICE vehicles.

GM recently hosted an investor day at a Tennessee manufacturing facility that can produce both types of vehicles depending on demand.

"We're really being led by the customer," Barra said on a conference call with analysts. "There's been cases where we wait until the last moment when we have to make a decision, Are we going to do a next generation of an ICE version?"

- China performance -

GM reported a loss in equity income from China for the third straight quarter.

Executives noted that the company's China performance improved from the prior quarter and that its inventories in the country have fallen. However, GM will hold meetings with its Chinese joint-venture partner in the fourth quarter to restructure the enterprise.

"We believe we can turn around the losses," Barra told analysts, noting China's huge consumer market.

China has a "very challenging environment," she said. "But we do believe there's a place we can participate in a very different manner and do that profitably."

Barra said GM is also focused on bringing in partners to help finance its Cruise autonomous venture, which was relaunched earlier this year after a halt in San Francisco due to safety problems.

"We want to make sure we're investing in autonomy as efficiently as possible," she said. "There's a number of conversations that we're having with partners that I think just allows us to manage that investment more wisely."

Shares of GM surged 8.2 percent in morning trading.

(K.Müller--BBZ)