Video: GM’s strong quarter

msnbc.com news services
updated 5/5/2011 11:29:04 AM ET 2011-05-05T15:29:04

General Motors Co. reported its highest quarterly profit in more than a decade Thursday, helped by demand for fuel-efficient cars and a big gain from selling its stake in its former auto parts business.

The biggest U.S. automaker said Thursday that it earned $3.2 billion, or $1.77 per share, in the first quarter. It was a great start considering the spike in U.S. gasoline prices, a trend that would have sunk the company just a few years ago when it relied on gas-guzzling pickups and SUVs for profits.

In fact, it was one of GM’s best quarterly performances since the SUV boom in the early 2000s and its fifth straight quarterly profit since late 2009, the year it emerged from bankruptcy.

GM's results follow strong earnings reports at crosstown rivals Ford Motor Co. and Chrysler Group LLC, a sign that the U.S. auto industry is recovering well from the recession and bankruptcies.

GM thrived in the quarter by selling small cars like the new Chevrolet Cruze, and efficient crossover vehicles such as the Chevrolet Equinox and GMC Terrain. Revenue rose 15 percent to $36.2 billion, driven by a 25 percent jump in U.S. auto sales and a 10 percent gain in China, which has emerged as GM's biggest market. Sales are so strong that GM almost certainly will retake the title of world's biggest automaker from rival Toyota Motor Corp. this year.

Story: Automakers are putting their cars on a diet

GM's quarterly net income is more than triple the $865 million it earned in the first quarter of last year. It's also a good sign for the U.S. government, which is hoping the profit boosts GM's stock price so it can sell its stake in the company and recoup more of the $50 billion taxpayer bailout that saved GM two years ago.

GM's latest results included a $1.6 billion gain from selling the company's stake in Delphi Automotive LLC, its former parts division, as well as a $400 million charge in Europe because of a change in accounting standards.

The net income was one of GM's best first quarters since at least 2000, when sales of SUVs and pickup trucks were booming. It also gets GM out of the gate quickly to pass the $4.7 billion it made last year, GM's first profitable year since 2004 and its best performance since 1999.

Among those rooting for GM is the U.S. Treasury Department, where officials will try to figure out the right time to sell the remaining 500 million GM shares owned by the government. GM took nearly $50 billion in U.S. government aid to help it survive in 2009. The U.S. government has been repaid about half that amount and would need to sell its remaining shares for roughly $53 each to get all its money back.

The government can sell its shares starting May 22, but will wait until they hit the right price. GM shares closed Wednesday at $33.03, the first time they closed above the $33 IPO price since March 3.

Without one-time items in the quarter, GM earned $1.7 billion, or 95 cents per share.

That beat Wall Street estimates. Analysts polled by FactSet expected $1.6 billion, or 88 cents per share, on revenue of $35.3 billion. Analysts typically exclude one-time items from their forecasts.

Story: U.S. auto sales jump in April amid demand for smaller cars

GM said it earned $2.9 billion before taxes in North America, more than double its profit a year earlier. North American sales were up 18 percent, and GM said it expects that to improve as the year progresses because it is getting higher prices for its cars and trucks. GM raised U.S. prices a little less than 1 percent since the end of last year and has cut spending on incentives such as low-interest loans and rebates.

The company also could benefit from supply shortages at its Japanese rivals as a result of the March 11 earthquake, but GM also could run low on parts made in Japan. Chief Financial Officer Dan Ammann wouldn't say how many vehicles GM could lose as a result of production slowdowns from the quake, but said it wouldn't impact the company's earnings.

Earnings in GM's international operations, which include Asia and Russia, fell 47 percent to $408 million. Ammann said sales were still up 10 percent in China this year, but that was slower growth than the 30- to 40-percent increases in recent quarters. He said last year's first quarter was unusually strong for that division. GM lost money in Europe.

GM's first-quarter performance continues its remarkable turnaround after emerging from bankruptcy protection in 2009. The company lost more than $80 billion in the five years before the bankruptcy.

The Associated Press and Reuters contributed to this report.

Explainer: Ten cars with surprising gas mileage

  • Image: 2011 Chevrolet Corvette Coupe
    GM  /  Wieck
    The 2011 Chevrolet Corvette Coupe delivers an impressive 26 mpg on the highway.

    Everyone and his goldfish knows that you can get good gas mileage by driving a Toyota Prius. But many of us want to buy cars with features that typical high-mileage economy cars don’t provide.

    Those requirements don’t have to doom us to terrible fuel economy; we just have to choose our cars more carefully. So here’s a list of 10 vehicles with unexpectedly good fuel economy for their size and/or vehicle type.

    (Note: This is not a list of the 10 vehicles with the best fuel economy; you can find that list on the EPA’s website).

  • Audi Q7 TDI

    Audi

    EPA MPG city/highway/combined: 17/25/20
    Drivetrain: 3.0-l V6 diesel, 8-sp man.
    Vehicle category: 7-seat SUV

    With the Q7 you really can average 25 mpg on a long trip in a sure-footed quattro all-wheel-drive, three-row, seven-seat SUV. You do have to fuel it with diesel, which costs a bit more than gasoline, but you will only have to do that every 600-something miles. And you won’t pay any other penalties because the performance and smoothness of the drivetrain are indistinguishable from that of a comparable gas turbo V6.

  • Buick LaCrosse eAssist

    GM  /  Wieck

    EPA MPG city/highway/combined (estimated): 25/37/31
    Drivetrain: 2.4-l 4-cyl. Hybrid, 6-sp auto
    Vehicle category: mid-size car

    Here’s a midsized Buick — with all the luxury the brand implies — that delivers 37 mpg on the highway. The old advertising slogan was “Wouldn’t you really rather drive a Buick?” The answer to that question for many

    years was “no,” but now that the company’s products have become excellent, if the alternative is some cramped, buzzy econobox, here’s your 37 mpg solution. Because of the compact size of the “eAssist” mild hybrid system, the rear seats fold flat for a pass-through from the trunk — a feature that isn’t available in full hybrid sedans because the space behind the seat is occupied by electric drive electronics.

  • Chevrolet Equinox

    GM  /  Wieck

    EPA MPG city/highway/combined: 22/32/26
    Drivetrain: 2.4-l 4-cyl, 6-sp auto
    Vehicle category: SUV

    Compact SUVs are the new family cars for many consumers, but even though they aren’t gargantuan ground-pounders, they can still get pretty mediocre fuel economy, especially when equipped with a V6. Chevy has dropped in a brawny-but-smooth four-cylinder that delivers 32 mpg in highway driving, and buyers have been snapping them up as fast as the company can build them.

  • Chevrolet Corvette

    GM  /  Wieck

    EPA MPG city/highway/combined: 16/26/19
    Drivetrain: 6.2-l V8, 6-sp man.
    Vehicle category: two-seater

    No one buys sports cars for their fuel economy, but wouldn’t it be nice if some ludicrously fast 430 hp rocket also delivered 26 mpg on the highway? Well, here it is. The Corvette will crank out mile after mile of mid-20s mileage while you’re on the highway driving to the best curvy mountain roads or some distant race circuit for a bit of track day fun.

  • Ford Fusion Hybrid

    Ford  /  Wieck

    EPA MPG city/highway/combined: 41/36/39
    Drivetrain: 2.5-l 4-cyl. hybrid, CVT
    Vehicle category: midsize car

    Here’s the most efficient vehicle on this list, with 39 mpg in combined driving — the 41 mpg city, 36 mpg highway Ford Fusion Hybrid. It doesn’t carry the humpbacked styling or overt political connotations of a Prius, but it does deliver nearly the same gas mileage in a vehicle with a more comfortable ride and vastly better handling.

  • Ford F-150

    Ford  /  Wieck

    EPA MPG city/highway/combined: 17/23/20
    Drivetrain: 3.7-l V6, 6-sp auto
    Vehicle category: full-size truck

    It takes energy to move a load, and that energy comes from gas. Trucks burn more gas than cars even when they aren’t hauling loads because they are built big and sturdy enough to withstand heavy-duty use. That has typically meant that gas mileage ranged between “dismal” and merely “bad.” But Ford’s new V6-powered F-150 has achieved the widely accepted threshold of “decent” gas mileage — 20 mpg. That’s the truck’s combined EPA rating, and they EPA says it can do even better on the highway at 23 mpg. Our testing scored 20 mpg highway too, but other reviewers did better. Regardless, it is a big step forward considering that old trucks wouldn’t go 20 miles on a gallon of gas even if they started driving atop the Continental Divide.

  • Honda Odyssey

    Honda  /  Wieck

    EPA MPG city/highway/combined: 19/28/22
    Drivetrain: 3.5-l V6, 6-sp auto
    Vehicle category: minivan

    Remind me: Why do we call these things “minivans” again? They were pretty small when they started out, but now they are 4,500-pound, eight-passenger behemoths. It would be asking a lot for something this big to get reasonable gas mileage, but the Odyssey delivers, using cylinder deactivation to run on three cylinders when possible, along with a six-speed transmission to get the power to the wheels as efficiently as possible.

  • Hyundai Sonata

    David McNew  /  Getty Images

    EPA MPG city/highway/combined: 24/35/28
    Drivetrain: 2.4-l, 6-sp man.
    Vehicle category: large car

    The Hyundai Sonata has a smidge more interior space than the Fusion or LaCrosse and rates 35 mpg highway with its base engine and transmission. Hyundai also offers a hybrid version, but the everyday model provides 35 mpg on the window sticker, and anecdotal evidence says it will even get 40 mpg on the highway.

  • Hyundai Elantra

    Hyundai

    EPA MPG city/highway/combined: 29/40/33
    Drivetrain: 1.8-l 4-cyl, 6-sp auto
    Vehicle category: Compact car

    Forty mpg might be a stretch for the Sonata, but the compact Elantra should do that without breaking a sweat, according to the EPA’s 40 mpg highway rating. As with the bigger Hyundai, the Elantra achieves its segment-benchmark fuel economy rating with its base drivetrain, so the hundreds of thousands of Elantras the company sells will all contribute to the fleet of 40 mpg cars on the road. This is in contrast to the special, high-efficiency models from competitors, which cost more and will account for a paltry few percent of sales.

  • Volkswagen Passat

    Volkswagen

    EPA MPG city/highway/combined (estimated): 31/43/35
    Drivetrain: 2.0-l 4-cyl. diesel, 6-sp. dual-clutch auto-manual
    Vehicle category: large car

    If the diesel engine in the Q7 can get 26 mpg on the highway, what could one in a slippery sedan achieve? According to VW, the answer will be 43 mpg when the EPA’s official numbers are announced. That means the Passat will go more than 800 miles on a tank. Those of us who love pumping gas in the freezing cold or blazing heat might miss standing out in the weather regularly, but for the rest of us, incredible efficiency matched with a large fuel tank combine to provide unprecedented freedom from pumping fuel.

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