© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: November 10, 2010 2:03 pm
General Motors reported third-quarter net income of $2bn and said it expected to report its first profitable full year since 2004.
The Detroit-based carmaker, whose largest shareholder is the US government, said on Wednesday that it had generated net cash of $2.6bn in the quarter. After adjusting for capital expenditures worth $1.2bn, GM’s free cash flow for the quarter was $1.4bn.
GM’s earnings before interest and tax (ebit) in North America reached $2.1bn, higher than the $1.6bn it reported in the second quarter. Its international operations – primarily China and Latin America – reported ebit of $600m, down from $700m in the second quarter.
In Europe, where GM is restructuring its Opel/Vauxhall operations, the company’s loss widened to $600m before interest and tax, from $200m in the second quarter.
The carmaker, the global industry’s second-largest by sales after Japan’s Toyota, said that it expected its fourth-quarter ebit to remain positive, but at a lower run-rate than in the previous three quarters.
Chris Liddell, GM’s chief financial officer, told a conference call that the company’s fourth-quarter ebit would be hit due to a different production mix, the costs of launching new vehicles such as the forthcoming Chevrolet Volt electric car, increased engineering costs, and a $700m non-cash charge for the purchase of its Series A stock held by the US Treasury.
GM said it expected profitable year-end results for the calendar year. GM had last week indicated that it expected to post third-quarter net earnings of $1.9bn-$2.1bn
The result marks GM’s third quarterly profit in a row since its restructuring in bankruptcy last year.
It comes as the carmaker prepares to return to public markets with a share offering at the end of next week.
GM’s initial public offer is expected to raise about $13bn, including $3bn in convertible preferred shares. It will allow the US government to reduce its stake from 61 per cent to less than 50 per cent.
Two teams of GM executives are marketing the IPO to investors in North America and Europe ahead of its expected pricing on November 17. The roadshow has emphasised GM’s success in cutting costs and expanding its business outside the US, especially in fast-growing emerging markets such as China and Brazil.
In Wednesday’s conference call Dan Akerson, GM’s chief executive, said that the third-quarter result “will cap a good first year for the new GM”.
“We sold more vehicles this year with four brands than we did last year with eight”, he said.
Mr Akerson said that GM had “significantly lowered our cost base” and that the company enjoyed the number one market share position in combined BRIC [Brazil, Russia, India and China] markets.
However, he added: “We know we have much work to do . . . We still need to fix Europe”.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in