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

General Motors (GM) has reported a third-quarter profit of $3 billion, even as it faces declining sales in the U.S. and losses in its once-reliable joint venture in China. The profit, while slightly less than the previous year, showcases the company's resilience in a challenging market.

In terms of financial performance, GM generated $48.8 billion in revenue from July to September, which is a 10% increase from the same period last year. This growth was bolstered by stable average vehicle sale prices in the U.S., which remained steady at over $49,000.

Chief Financial Officer Paul Jacobson explained that while overall U.S. sales dropped by 2.2% during the quarter, most of this decline was due to reduced sales to large fleet buyers. Sales to individual customers, which are typically more profitable, actually rose by 3%.

Unlike many of its competitors that are struggling with excess inventory of high-priced vehicles amidst a shift toward more affordable options, GM has managed to maintain steady demand. Jacobson noted, “I think that the consumer has held up remarkably well for us,” and he expressed optimism for the upcoming year as the Federal Reserve continues to reduce interest rates, potentially lowering borrowing costs.

In terms of earnings, GM reported an adjusted profit of $2.96 per share, exceeding Wall Street expectations of $2.38. Additionally, the company’s revenue surpassed estimates which were set at $44.67 billion.

Following this news, General Motors Co. shares increased by 2% in pre-market trading.

On the flip side, GM's joint venture in China reported a loss of $137 million, in stark contrast to a profit of $192 million during the same quarter last year. Jacobson attributed this loss to difficult market conditions in China, where domestic brands are producing high-quality vehicles at lower costs.

The company is collaborating with its partner SAIC to restructure the operations in China, with several important meetings planned for the fourth quarter. Jacobson emphasized that while they have not yet implemented significant restructuring, indicators suggest an improving situation with rising sales and reduced inventory.

In North America, GM's pretax profits rose by 13%, reaching $3.98 billion. However, the Cruise autonomous vehicle unit continues to struggle, narrowing its losses to $435 million. Cruise, which lost its license for robotaxi operations in California after an incident in San Francisco, has resumed testing with human safety drivers in three markets.

This performance in the third quarter has allowed GM to revise its full-year net income forecast. The company now anticipates earning between $10.4 billion and $11.1 billion, although it has adjusted the top end of this range down from previous estimates.

Moreover, GM reported selling 32,000 electric vehicles during the quarter, with discounts that were notably lower than the industry average by 11 percentage points. CEO Mary Barra mentioned in a letter to shareholders that the company is making significant strides towards achieving profitability in its electric vehicle sector, projecting the production of 200,000 EVs for the year.

Jacobson noted, “We’re seeing demand start to inflect a little bit higher as we’re building awareness out there for the products,” indicating positive momentum in their electric vehicle division.

GM, profit, China