DETROIT – General Motors Co said on Thursday that first-quarter profit tumbled 88 percent after a massive recall due to defective ignition switches, but results still topped expectations on strong pricing for its redesigned pickup trucks in North America and improvement overseas.
The company said its core operating outlook remained on target for the year, relieving investors who bid up the stock by 3 percent.
"It should be good enough to ease concerns," Citi analyst Itay Michaeli said. "Expectations were very low. People were just kind of nervous overall about how the quarter would look. The story really here though, in terms of fundamentals, is better performance in the international regions."
The quarter included a previously disclosed charge of $1.3 billion for the recall. Chief Financial Officer Chuck Stevens said it was too early to predict whether GM would take more charges. He also said the company was still studying its options for the victims of the faulty switches, which have been linked to at least 13 deaths.
Safety advocates and some lawmakers have called for GM to establish a victims compensation fund.
"Obviously, the recall campaign charges in the first quarter overshadows the headline results, but if you look underneath that, we had strong performance across the board," Stevens told reporters at the company's Detroit headquarters.
Some GM ignition switches have made vehicle engines stall while operating, stop airbags from deploying, and power steering and power brakes from operating. The company is under investigation by U.S. safety regulators, Congress and the U.S. Department of Justice over its failure to detect the faulty part for more than a decade.
Net income in the first quarter fell to $108 million, or 6 cents a share, from $873 million, or 58 cents a share, in the year-earlier period. The most recent quarter included recall costs of $1.3 billion, or 48 cents a share.
Excluding a charge mostly for the devaluation of the Venezuelan currency, GM earned 29 cents a share, far better than the 4 cents analysts expected, according to a poll by Thomson Reuters I/B/E/S.
Revenue rose 1.4 percent from last year to $37.4 billion, but below the $38.4 billion that analysts expected.
GM raised prices for its vehicles, which boosted operating profits by $1.8 billion. The bulk of the increase was in North America, thanks to higher sales of more lucrative versions of its redesigned Chevrolet Silverado and GMC Sierra full-size pickup trucks.
Stevens said the average transaction price for the trucks rose about $5,000 in the quarter from a year ago, and overall prices were up about $2,000 per vehicle.
Citi's Michaeli said North American results were solid, profit margins in China rebounded from the fourth quarter and the performance in Europe improved.
GM's operating profit in North America fell 61 percent to $557 million due to the costs associated with the defective switches and other recalls. Profit at its international operations, including China, fell 47 percent to $252 million.
The loss in Europe widened to $284 million from $152 million last year, but the quarter included $200 million in restructuring costs already outlined by the company. CFO Stevens said the company was "seeing real progress in Europe." It has said financial results would return to breakeven by mid-decade.
The loss in South America grew to $156 million from $38 million last year.
Of the $1.3 billion to cover the various recalls in the first quarter, GM said about $700 million was related to the defective ignition switches, including $300 million to cover the cost of courtesy cars for owners who do not want to drive the cars affected by the recall switch.
GM said multiple shifts were working at Delphi Automotive Plc plant in Mexico, where replacement parts for the switch recall are being made. A second line will likely begin production in June, with a third line to begin later in the summer. It said it would have enough parts by October to repair most of the affected cars, a spokesman said.
Shares in GM rose 3 percent, or $1, to $35.38 on the New York Stock Exchange.
(Editing by Jeffrey Benkoe)