General Motors Reports $3 Billion Profit in Third Quarter Despite Sales Challenges

Despite witnessing a decline in U.S. sales and experiencing losses from a previously profitable joint venture in China, General Motors (GM) has recorded a third quarter profit of $3 billion. This marks a slight decrease from the profit reported in the same quarter the previous year.

During the period from July to September, GM generated $48.8 billion in revenue, which is a 10% increase compared to last year. This growth was supported by stable average vehicle sale prices in the U.S., which remained above $49,000.

Chief Financial Officer Paul Jacobson stated that although GM's overall sales in the United States, their most lucrative market, fell by 2.2% in the quarter, sales to individual customers increased by 3%. This increase is significant because sales to individual consumers are typically more profitable than fleet sales.

Unlike some other automakers that are struggling with an oversupply of high-priced vehicles while consumers are seeking lower costs, GM has not yet faced such hurdles. Jacobson expressed confidence in the consumer market, stating, "I think that the consumer has held up remarkably well for us." He anticipates continued stability next year as the Federal Reserve works to lower interest rates and reduce borrowing costs.

When adjusting for one-time factors, GM reported a profit of $2.96 per share, surpassing Wall Street's expectations of $2.38, as referenced by FactSet. The company's revenue also exceeded estimates of $44.67 billion.

In response to the positive financial results, General Motors' stock saw a 2% increase prior to the market opening on Tuesday.

Conversely, GM's joint venture in China reported a loss of $137 million, a significant decline from a $192 million profit the previous year. Jacobson attributed this loss to competitive market conditions where domestic brands are producing well-designed vehicles at lower price points.

GM is collaborating with its partner SAIC in China to restructure this joint venture and plans to have key discussions in the fourth quarter. Jacobson mentioned, "We believe that the situation is improving, but there’s still work to do with our partner," while noting that sales in China have increased and inventory levels have decreased.

Meanwhile, pretax profits in North America rose by 13% to $3.98 billion, while the losses for the Cruise autonomous vehicle division narrowed to $435 million. Cruise faced setbacks, including losing its license to run robotaxi services in California, following an incident last year. However, the unit has resumed testing with human safety drivers in three markets along with driverless testing in Houston.

The performance in the third quarter allows GM to adjust its full-year net income guidance. The company now projects earnings between $10.4 billion to $11.1 billion, a slight update from the previous range of $10 billion to $11.4 billion.

GM reported selling 32,000 electric vehicles during the quarter, with discounts 11 percentage points lower than the industry average. CEO Mary Barra shared with shareholders that GM is making strides towards EV profitability and anticipates producing 200,000 electric vehicles by the end of the year.

Jacobson stated, "We’re seeing demand start to inflect a little bit higher as we’re building awareness out there for the products."

profits, China, sales