GM 1Q Profit Disapponts on S. American Weakness

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General Motors Co (GM) posted a smaller-than-expected quarterly profit on Thursday as weakness in South America and Russia hurt demand and the company's tax rate was higher than expected, sending shares down 3 percent.

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"Clearly the macro environment in South America, and it's primarily Brazil, deteriorated versus even where we thought it was going to be," Chief Financial Officer Chuck Stevens told reporters at the company's Detroit headquarters.

He expects the region to be "reasonably challenged" through the first half of the year, but said GM is targeting second-half profits similar to the same period last year.

Stevens said the No. 1 U.S. automaker has cut jobs and will reduce production shifts at plants in Brazil. He said the actions will generate about $200 million in annual savings. GM lost $214 million in South America in the first quarter.

Stevens affirmed the Detroit company's overall 2015 outlook for improved profit and said it remained on track in 2016 to hit 10 percent profit margins in North America and return to profitability in Europe.

First-quarter net income rose to $945 million, or 56 cents a share, from $125 million, or 6 cents a share, a year earlier. Last year's results included charges related to recalls including those from a defective ignition switch.

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Excluding one-time items related to ending manufacturing in Russia and a compensation program related to the faulty switch, GM earned 86 cents a share. Analysts estimated 97 cents, according to a poll by Thomson Reuters I/B/E/S.

Revenue fell 4.5 percent to $35.7 billion, below the $37.6 billion that analysts expected. Sales were hurt by lower volume in Brazil and Russia as well as the impact of weakening currencies in South America due to the strong U.S. dollar. GM said in March it would shut a Russian factory and wind down its Opel brand there due to slumping demand.

South America accounted for about 6 cents of the earnings shortfall while another 4 cents to 5 cents came from the higher-than-expected tax rate, GM said.

Through the first quarter, Stevens said GM bought back about $400 million in company shares, with the total rising to more than $700 million through Wednesday night. Between share buybacks and dividends, GM returned about $800 million to shareholders.

In March, GM said it would launch a $5 billion share buyback in an effort to avert a proxy war with dissident investors.

Shares of GM fell to $36.05 in premarket trading from Wednesday's closing price of $37.16 on the New York Stock Exchange.

(Editing by Chizu Nomiyama and Jeffrey Benkoe)