By Ben Klayman and Deepa Seetharaman
GM vowed to slash costs and complexity to shore up margins in a sputtering economy but its fourth-quarter outlook disappointed investors and sent shares tumbling more than 8 percent in trading before the market opened.
Chief Executive Dan Akerson said the top U.S. automaker was not performing well enough, almost a year after a record IPO that capped the automaker's return from a U.S. government bailout and bankruptcy.
"GM delivered a solid quarter ... but solid isn't good enough; even in a tough global economy," he said.
Chief Financial Officer Dan Ammann said GM needed to eliminate "cost and complexity" from its operations, suggesting the kind of campaign Ford Motor Co has run under CEO Alan Mulally for nearly five years.
Ford, GM's closest rival, last month posted third-quarter net earnings that were nearly as high as GM's, on revenue that was 10 percent lower than GM's sales.
The contrast in operating efficiency is even more striking because Ford, the only U.S. automaker to have avoided bankruptcy, ended the third quarter with almost $13 billion in debt, excluding its finance arm.
GM, which boasts that its taxpayer-funded restructuring left it with a "fortress balance sheet," ended the third quarter with less than $3 billion in long-term debt.
GM's third-quarter profit in Asia fell 29 percent as growth in China slowed and results in South America swung to a loss of $44 million from a gain of $163 million last year as its market share shrank due to an aging lineup of vehicles.
"We're definitely worried about this situation in South America, the slowdown in China," said Citi analyst Itay Michaeli, who has a "buy" rating on GM's shares.
"The big story today is going to be what looks like a pretty disappointing fourth-quarter outlook," he added, saying he had been expecting an improved performance in the current quarter.
GM's net income in the third quarter fell to $1.7 billion, or $1.03 a share, compared with $2 billion or $1.20 a share in the year-earlier period. Analysts had expected 96 cents a share, according to Thomson Reuters I/B/E/S.
Revenue rose to $36.7 billion from $34.1 billion last year. That was in line with analysts' expectations.
'SYMBOLIC' OF ECONOMIC UNCERTAINTY
Jefferies analyst Peter Nesvold said GM's performance and outlook mirrored the increasing uncertainty for economic growth outside North America.
"To some degree, this feels a little symbolic with what we're seeing globally," said Nesvold, who has a "hold" rating on the stock. "
Akerson said GM needed to improve its profit margins, which were 6 percent in the third quarter, down from 6.7 percent last year.
GM emerged from bankruptcy in 2009 after a $52 billion taxpayer-funded bailout. The U.S. Treasury owns 32 percent of GM's common shares, and how it unwinds that stakes remains an unanswered question.
As GM's share price has slipped well below last fall's $33 initial public offering price, Treasury officials have maintained they will not rush to sell the government's remaining stake.
Coming out of bankruptcy, Akerson and other executives said the company stripped out enough costs to make the business recession proof so it could thrive even in a recessionary auto market.
On Wednesday, GM said it expects fourth-quarter adjusted earnings before interest and taxes to be similar to the same quarter last year.
It backed away from its full-year target for Europe, saying it no longer expected to break even in Europe before restructuring costs due to deteriorating conditions there. On Monday, GM announced it would change top executive in Europe.
"We obviously have significant macroeconomic challenges to address," Ammann told reporters. "We're not relying on the big pickup in volume in the industry to bail us out if you like and we're very much focused on getting the break even point down further so we can get to a point where we're sustainably profitable."
GM also said the underfunded status on its U.S. pensions stood at $8.7 billion at the end of September, down from $10.8 billion at the end of June. However, that was according to the valuation set at the end of 2010 and will be revalued at the end of this year.
GM said it would record a $800 million noncash accounting gain in the fourth quarter as a result of taking retiree healthcare liabilities of C$3 billion off its balance sheet.
GM's shares were down about 8 percent at $23.02 in trading before the market opened on Wednesday, compared with Tuesday's close at $25.04. fell 7.3 percent to $23.20 per share in pre-market trading. Its shares are down 39 percent from this year's high reached in January, and down 27 percent since its IPO price of $33 a year ago.
(Reporting by Ben Klayman, Deepa Seetharaman and Bernie Woodall in Detroit; Editing by Derek Caney and Matthew Lewis)