Video: GM's turnaround challenge

updated 5/3/2007 10:28:47 AM ET 2007-05-03T14:28:47

General Motors Corp. reported Thursday its first-quarter profit fell 90 percent compared with a year ago, citing losses in the home lending operations of its former financial arm.

It was the second consecutive quarterly profit for the nation’s largest automaker which said it had record vehicle sales worldwide and improvements in its automotive operations in the latest quarter.

But the profit of $62 million, or 11 cents a share, for the January-March period was down from $602 million, or $1.06 per share, a year ago.

The company attributed the year-over-year decline to losses in the residential mortgage business of GMAC Financial Services. GM sold a 51 percent stake in GMAC to private equity investors last year, but still owns a 49 percent stake in the business.

“We were able to expand vehicle sales and improve automotive profitability based on the progress in our turnaround initiatives in North America and Europe and our expansion strategy for key growth markets like China, Russia and South America,” Rick Wagoner, GM chairman and chief executive, said in a statement.

“We continue to see progress on the automotive bottom line as we implement the strategies laid out two years ago.”

While the automaker’s North American performance improved, the company still lost an adjusted $85 million on its core operations, GM said.

The company also reported $32 million of special items largely due to restructuring in its Europe and Asia Pacific divisions. Its results a year ago were also inflated by a one-time after-tax gain of $395 million due to the sale of its equity ownership of Suzuki Motors.

Excluding special items, GM’s net income was $94 million, or 17 cents per share, compared with net income of $350 million, or 62 cents per share in the first quarter of 2006. Those results fell short of Wall Street expectations.

Fifteen analysts polled by Thomson Financial predicted earnings of 87 cents per share, excluding special items.

Chief Financial Officer Fritz Henderson attributed the difference primarily to a $115 million loss from GMAC, its former financial arm. He said analysts didn’t try to estimate the GMAC losses, which he said would be much less in the second quarter.

First-quarter revenue was $43.9 billion, down 16 percent from $52.4 billion in the same period a year ago. GM said the decline was almost entirely due to GMAC revenue no longer being included in GM’s consolidated results.

Automotive revenue for the quarter was $42.9 billion, down from $43.6 billion in the first quarter of 2006.

But while automotive revenue slipped, the number of cars and trucks GM sold globally rose 3 percent to 2.26 million in the quarter.

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