GM profits surge to $3.2 billion in first quarter

General Motors on Thursday posted net income of $3.2 billion for the first quarter, its fifth straight quarterly profit since emerging from bankruptcy.

Stripping out one-time charges and gains, including $1.6 billion in income from the March sale of GM's ownership in Delphi Automotive, GM earned $2 billion before interest and taxes. GM's net income for the January-through-March period a year earlier was $865 million.

Revenue grew 15 percent, to $36.2 billion.

"We are on plan," GM CEO Dan Akerson said in a statement. "GM has delivered five consecutive profitable quarters, thanks to strong customer demand for our new fuel-efficient vehicles and a competitive cost structure that allows us to leverage our strong brands around the world and focus on driving profitable automotive growth."

Strong demand in North America led the way. Earnings before interest and taxes in the region more than doubled to $2.9 billion, compared with $1.2 billion during the same quarter last year.

GM said it expects North American profits to improve over the rest of the year thanks to better pricing and cost cuts, which should offset continued increases in commodity costs and a shift from trucks to less-profitable cars.

In a statement, GM reiterated that it "continues to expect no material impact on full-year results from the Japan crisis."

CFO Dan Ammann credited the strength in North America to climbing U.S. market share, improved pricing and a reduction in fixed costs. He said prices have risen 0.8 percent across-the-board since the beginning of the year, including a 0.4 percent increase that GM announced last month to offset climbing raw-materials costs.

GM's U.S. market share grew to 19.6 percent through the end of April, from 18.7 percent in the first-quarter of 2010, according to the Automotive News Data Center.

Ammann said the effect on profit margins from a shift away from more-profitable pickups and SUVs is blunted by GM's more-competitive car offerings.

"We're obviously putting the right vehicle portfolio forward for this kind of fuel environment," Ammann told reporters at GM's headquarters.

GM in Europe lost $390 million before interest and taxes, compared with a $490 million loss a year earlier. But it broke even on an operating basis in the latest quarter. GM is targeting break-even for the year in Europe.

GM's profits declined elsewhere in the world. Its international division, which includes China, saw profits before interest and taxes drop from $908 million in the first quarter of 2010 to $480 million for the quarter this year. Ammann said the difference was because of an "unusually strong" performance in 2010.

In South America, earnings before interest and taxes fell from $265 million to $90 million. Ammann said GM is investing in the region to improve its product lineup, which pinched profits. "It's really a story about reinvesting in that portfolio and that region," he said.

GM Financial, the former AmeriCredit that GM acquired last year, chipped in $130 million in earnings, before interest and taxes.

In addition to the gain on its Delphi sale, GM saw the following special items in the latest quarter:

-- A $300 million gain on its sale of Ally preferred stock;

-- A $400 million loss due to goodwill impairment at GM-Europe. GM also said it could experience future goodwill impairments in Europe, where it has $1.3 billion in goodwill still on the books as of March 31;

-- A $100 million loss on an Indian joint-venture impairment and related charges.

In contrast, it had only one special item a year earlier: a $100 million gain on its sale of Saab.

UBS Securities analyst Colin Langan said in a research note this week that things should get better for GM as the year unfolds. Langan said GM stands to pick up 1.1 percentage points of market share at the expense of Japanese automakers, which face production shortages stemming from the March 11 earthquake and tsunami.

Langan wrote: "GM will be the biggest beneficiary of the upcoming Japan-related inventory shortages."

By Mike Colias- Automotive News