(Bloomberg) -- General Motors Co (NYSE:GM).’s hot-selling new crossovers are padding profit for the largest U.S. automaker amid a costly retooling of truck factories and restructuring of Korean operations.
Adjusted earnings fell to $1.43 a share in the first quarter, beating analysts’ average estimate for $1.24. The Chevrolet Equinox and GMC Terrain drove better-than-expected revenue and buoyed GM through downtime at pickup plants that shut down early this year for retooling to build redesigned versions of the Chevrolet Silverado and GMC Sierra.
Wall Street was expecting the revenue and profit drop, and Chief Finance Officer Chuck Stevens called the results a “very solid performance.” He said GM is on pace to nearly match last year’s record profit on the strength of new SUVs, growth in China, improvements in South Korea and gains by its auto-lending business.
The company is “very much on plan based on our expectations for the year and given some of the challenges related to the truck downtime,” Stevens told reporters Thursday in Detroit. “Within that, we had very solid North American performance and record earnings in China and record earnings at GM Financial.”
Barra’s Ambition
Chief Executive Officer Mary Barra delivered an ambitious forecast at the beginning of 2018: that GM would keep earnings consistent with last year in spite of the changeover involving GM’s lucrative truck lines. The automaker made 47,000 fewer full-size pickups in the first quarter. That squeezed revenue, which dropped to $36.1 billion.
GM shares slipped 0.9 percent $37.75 as of 8:42 a.m. in New York, before regular trading.
Margins in GM’s North America business fell to 8 percent, from 11.8 percent a year earlier, but executives reaffirmed a target of at least 10 percent for the full year, along with total earnings per share in the mid-$6 range.
The automaker’s restructuring of its Korean operations resulted in a one-time charge of $942 million related to closing a plant in Gunsan, paying termination benefits and non-cash impairment charges.
GM’s Korean labor union has ratified an agreement that, coupled with factory closure, will lead to $400 million to $500 million in cost savings. Stevens said GM is reducing its workforce to 13,000, from 17,000, and cutting production capacity by 25 percent.
Pricier raw materials, especially steel, was a $200 million headwind in the quarter, and adding content to new models heaped on another $500 million in cost.
At the same time, GM’s China business reported record quarterly income of $597 million, up from $504 million a year ago. Its GM Financial lending unit doubled income to a record $443 million in the quarter.
(Updates with guidance affirmation in the third paragraph.)
