GM Q1 profit worst in 4 yrs. after recalls
By Tom Krisher and Dee-Ann Durbin ,AP
April 25, 2014, 12:05 am TWN
DETROIT--General Motors on Thursday reported its worst quarterly performance in more than four years as the costs of a series of recalls dragged down earnings.
First-quarter profit fell 86 percent to US$125 million. The Detroit automaker took a US$1.3 billion charge for recalling about 7 million vehicles worldwide. GM also incurred US$300 million in restructuring costs, mostly in Europe. And it took another US$419 million charge due to a change in the way it values Venezuela's currency.
GM made 6 cents per share, down from 58 cents per share a year ago. The recall charge alone cut 48 cents off GM's first-quarter earnings.
Excluding one-time items, GM made 29 cents per share, far above Wall Street estimates of 3 cents per share.
It was a disappointing start to what many expected would be a strong year for GM. In January, the company announced its first quarterly dividend in six years.
But the recalls overshadowed the first quarter under the leadership of new CEO Mary Barra, the first woman to lead a major automaker. In February, GM announced it would recall more than a million older small cars because the ignition switches can slip from "run" to "accessory" or "off," shutting down the engine. That knocks out power steering and brakes and can cause drivers to lose control and crash. It also disables the air bags. Later, the recall was expanded to 2.6 million cars, and other recalls took the number to near 7 million.
GM admitted knowing about the problem at least a decade ago. Thirteen people have died in crashes linked to the problem, according to GM, although relatives of the victims say the death toll exceeds 30.
The financial results were GM's worst since late 2009, when it posted a US$4.4 billion loss for the five months after leaving bankruptcy protection.
Even so, the company's revenue for the quarter was strong. GM took in US$37.4 billion, up 1.3 percent from the year-ago quarter and in line with analysts' estimates.
GM's global sales for the quarter rose 2.3 percent to 2.42 million cars and trucks. China sales grew 13 percent, and sales in Europe rose less than 1 percent. But sales fell 2 percent in North America, GM's most profitable region. Sales fell 10 percent in South America.