Investors dumped General Motors Co shares on Tuesday despite record third-quarter results, highlighting the disconnect between Detroit and Wall Street as the long U.S. vehicle sales boom cools off.
GM's quarterly results zoomed past analysts' forecasts. But the automaker's share price tumbled, closing down 4.2 percent at $31.60 a share, reflecting investor fears it will not avoid a cyclical profit slump.
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The sell-off hit other U.S. auto stocks as well. Ford Motor Co shares fell 1.6 percent to $11.85, and supplier Delphi Automotive PLC fell 1.6 percent.
Fiat Chrysler Automobiles NV shares edged up 0.5 percent after the automaker raised its full-year profit forecast.
Top executives of the largest U.S. automaker tried to reassure investors. GM Chief Executive Mary Barra told analysts on Tuesday "we are working hard to make sure the core business is operating in a very disciplined fashion" while the company invests in future technology such as self-driving cars.
GM said full-year results should be on the "high end" of a previous forecast of $5.50 to $6.00 a share.
Chief Financial Officer Chuck Stevens said GM expects North American profit margins to stay at or above 10 percent because it will rein in discounts needed to close deals, cut $5.5 billion from costs and refresh its compact and mid-size sport utility vehicles at a time when demand for such vehicles is hot.
However, Stevens also said the overall U.S. car and light truck market is a "plateaued environment," and forecast the slumping British pound could slash $400 million from GM's European results for the year.
GM said revenue for the third quarter rose 10 percent to a record $42.8 billion, boosted by production of vehicles that went onto lots at GM's U.S. dealers. Compared with a year ago, GM said it had about 110,000 more vehicles in stock at U.S. dealers as of Sept. 30.
"GM will say our inventories are fine and our incentives are great," said Matthew T. Stover, automotive analyst with Susquehanna Financial in Boston. "The truth is their inventories are among the highest in the industry."
Among investors' concerns are signs that discounts on large pickup trucks are rising.
GM and rival Ford Motor Co, due to release third-quarter results on Thursday, have staked out competing views of the U.S. auto market. Ford warned in July that a slowing U.S. auto market would put its full-year profit forecast at risk.
GM has stuck with a more positive view, in part because it is reaping substantial profits from pickup trucks and large sport utility vehicles such as the $73,000 Cadillac Escalade. Ford bet during the past decade that gas prices would be high and cut back on its large SUV production, allowing GM to capture more than 70 percent of the lucrative segment in the United States.
GM's results and its outlook depend primarily on continued strength in the U.S. and Chinese markets. The company said it lost money in Europe, and Stevens said achieving break-even results for Europe this year will be "very, very challenging."
Overall, GM said third-quarter net income more than doubled to $2.8 billion, or $1.76 a share, from a year earlier.
Excluding a $110 million gain from litigation, earnings of $1.72 a share beat analysts' average estimate of $1.45, according to Thomson Reuters I/B/E/S.
(Reporting by Bernie Woodall; Editing by Meredith Mazzilli, Chris Reese and Dan Grebler)