GM cuts European jobs; stock spikesSFlb
Shares of General Motors surged Wednesday after the company announced big job cuts in Europe and reported third-quarter earnings that were far better than Wall Street expected.
The Detroit company said it has cut 2,300 jobs in Europe this year and wants to trim 300 more, part of a larger plan to reduce costs and raise revenue in the struggling region with new vehicles that are more appealing to buyers.
Despite the moves, General Motors Co.’s net profit fell 14 percent as European losses widened and North American earnings dropped due to falling pension income and higher warranty costs.
But investors looked past the decline because GM’s earnings far exceeded expectations. GM’s stock rose $2.12, or 9.1 percent, to $25.40 in afternoon trading.
The company rode North American profits, big improvements in South America and strong earnings in international areas outside of China to make $1.48 billion, or 89 cents per share, for the quarter. That’s down from $1.73 billion, or $1.03 per share, a year earlier. Excluding one-time items, the company made 93 cents per share, beating analysts’ estimates by 33 cents.
Still, there are signs of trouble. Profit in North America, GM’s most-lucrative market, fell 17 percent from July through September. The company’s U.S. market share dropped more than two percentage points to 17.6 percent, and its U.S. sales increase of 3.4 percent for the year lags overall market growth of 14.5 percent. In Europe, where GM hasn’t made money in a dozen years, it lost $478 million before taxes. That’s $186 million worse than a year earlier.
Yet GM said its third-quarter performance shows that steps it has taken to fix troubled business units are working. Four of the company’s five units were profitable, with Europe the only exception. “It stems from our geographic diversity, strong brands and the financial rigor we are instilling in the business,” Chairman and CEO Dan Akerson said.
Fourth-quarter pretax earnings should be about the same as last year’s $1.1 billion, the company said.