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GM's quarterly earnings drop 15 percent

DETROIT — General Motors made $1.7 billion in the third quarter, down 15 percent from a year earlier, as profit margins failed to keep pace with rising revenue.

After seeing profits in all four global regions in the second quarter, the automaker lost money in South America and in its long-troubled European region. Nearly all of GM's profits came from North America, where a more competitive cost structure and a recovering U.S. sales environment led to a $2.2 billion operating profit. Overall, revenue grew 7.6 percent to $36.7 billion from $34.1 billion a year earlier.

GM's third-quarter performance was "solid," CEO Dan Akerson said. But the automaker pointed to profit margins that currently stand at 6 percent, compared with Morgan Stanley estimates of 7.5 percent from other old, global automakers.

In particular, in Europe and South America, "results there are not sustainable and not acceptable," Akerson said.

For starters, that means more employment reductions in South America, where GM essentially broke even, compared with a $163 million profit a year earlier. GM already cut its workforce in South America by 4 percent this quarter, using voluntary buyouts, "and we recognize that we're going to have to go deeper," Akerson said.

Restructuring will intensify in Europe, where GM's market share slipped a third of a percentage point in the July-through-September period. After 11 straight annual losses in Europe, GM had already lowered its break-even point enough to post a profit there in the second quarter. But the European economy continues to deteriorate, leading to GM's $292 million loss last quarter, which was nevertheless a 48 percent improvement from last year.

GM said Wednesday that it expects its fourth-quarter earnings will be similar to those from a year earlier. The automaker had said it expected to be profitable in Europe next year. It is now waiting to give guidance on the region for next year.

GM beat profits from its crosstown rivals. Chrysler Group made $212 million in the third quarter, its second quarterly profit since its 2009 bankruptcy. Ford posted a $1.6 billion profit.

GM's quarterly earnings drop 15 percent 11/09/11 [Last modified: Wednesday, November 9, 2011 9:27pm]
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