GM chief hints at dividend

Pretax earnings up 15% on strong U.S., China sales

Robert Beattie of New Orleans looks at a 2014 Chevrolet Corvette Stingray outside the General Motors Co. Bowling Green Assembly Plant in Bowling Green, Ky., earlier this month. GM, which reported its third-quarter earnings on Wednesday, has now been profitable for 15 straight quarters.
Robert Beattie of New Orleans looks at a 2014 Chevrolet Corvette Stingray outside the General Motors Co. Bowling Green Assembly Plant in Bowling Green, Ky., earlier this month. GM, which reported its third-quarter earnings on Wednesday, has now been profitable for 15 straight quarters.

DETROIT - Another solid quarterly performance at General Motors prompted the strongest talk yet of the automaker paying a dividend for the first time in five years, or perhaps buying back stock.

GM on Wednesday reported pretax profit of $2.64 billion for the third quarter, up almost 15 percent over a year ago. Earnings grew in North America,South America and China, and losses narrowed in Europe.

Chairman and Chief Executive Officer Dan Akerson said during a conference call that the board knows shareholders want the best possible return on their investment. “We understand what we’re here for, and one of them is to return money to our shareholders,” he said, without giving a specific time frame.

GM eliminated its common stock dividend in July 2008, as the company’s finances deteriorated. It filed for bankruptcy protection in 2009.

Crosstown rival Ford Motor Co. also stopped paying a dividend five years ago. But Ford resumed the payout in 2012, and doubled it to 10 cents in this year’s first quarter. That makes Ford stock more attractive than GM to many investors.

GM’s strong third-quarter performance was masked a bit by $900 million worth of onetime items that sent net income down 53 percent from a year ago. Net income totaled $698 million, or 45 cents per share. That compares with $1.48 billion, or 89 cents per share, a year ago. Without one-time items and after paying taxes, GM earned $1.7 billion, or 96 cents per share. Analysts polled by FactSet expected 94 cents per share.

GM has now been profitable for 15 straight quarters.

Revenue rose 4 percent to$39 billion, just short of Wall Street’s estimate of $39.2 billion.

GM shares rose $1.17, or 3.2 percent, on the news to close at $37.23.

GM’s performance in North America was especially strong, with pretax earnings up 28 percent to $2.2 billion on solid pickup sales and better pricing. GM rolled out updated versions of its Chevrolet Silverado and GMC Sierra pickups in the spring.

GM’s average sales price rose 1 percent in the U.S. during the quarter to $34,566, according to Kelley Blue Book. Sales of the Silverado, its top-selling vehicle, rose 14 percent from a year ago. Prices for the pickup rose 2 percent to an average of $36,487.

“We’re in the very heart of the product-launch activity right now, and we’re going to build on the momentum that we’ve established here,” Chief Financial Officer Dan Ammann told reporters in Detroit. “We’re commanding good prices, we’re controlling costs.”

In North America, GM’s profit margin - or the percentage of revenue it keeps after expenses - was the highest in two years at 9.3 percent. GM has a goal of 10 percent pretax margins in the region by mid-decade.

North American profitability was “pretty good,” Christian Mayes, an analyst at Edward Jones & Co. in St. Louis, said Wednesday in an email. “Part of that was mix - selling more profitable crossovers and trucks. Part of it was pricing - higher prices outstripping incentives.”

GM’s third-quarter loss in Europe fell by more than half to $214 million. Revenue there rose year-over-year for the first time in two years. Ammann said the company cut $400 million in costs, and updated versions of its Opel Mokka small crossover sport utility vehicle and Adam subcompact sold well.

GM also plans to close a factory in Bochum, Germany, by the end of next year, causing significant restructuring costs that could show up as early as next quarter.

Outside of China, GM’s international operations struggled. Pretax earnings fell 61 percent to $299 million because of weakness in India, Australia and Southeast Asia. The unit would have lost more than $100 million without $400 million in earnings from China. “We expect these challenges to affect our performance in the fourth quarter,” Ammann said.

GM is transitioning out of its “government motors stemming from a 2009 bailout that left the U.S. the automaker’s largest shareholder.

The U.S. Treasury said in December 2012 that GM was buying back $5.5 billion worth of shares and that the government would sell off the rest of its stake within 15 months. In September, the Treasury said its ownership in GM had fallen to 7.3 percent from 32 percent in December. Akerson has said the government may exit before the year is over.

The Treasury’s bailout fund has lost about $9.7 billion on its GM rescue and would need to sell its remaining shares in the automaker for an average of $147.95 to break even, a report by the special inspector general for the Troubled Asset Relief Program said.

Also last month, GM announced a deal to buy $3.2 billion of preferred shares held by the United Auto Workers retiree medical trust. GM recorded one-time costs of about $800 million in the quarter because of the deal.

Information for this article was contributed by Tom Krisher of The Associated Press and Tim Higgins of Bloomberg News.

Business, Pages 25 on 10/31/2013

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