DETROIT — Strong profits on new cars and trucks helped General Motors Co. earn $2 billion in the third quarter, enhancing the company's appeal as it nears next week's initial public stock offering.
- From ESSENCE: See How Alicia Keys Is Empowering Black Women to End HIV/AIDS
- The Truth About Diem Brown's Age
- Meet the New Baker-In-Chief: White House Names First-Ever Female Pastry Chef
- Kenny Chesney to Receive Groundbreaker Award at American Country Countdown Awards
- The Pics AMAs Stars Just Couldn't Keep to Themselves
The third-quarter earnings of $1.20 per share nearly match what GM made in the first two quarters of the year combined, aided by profits from overseas and healthy revenue from North America, the company said Wednesday. The earnings were boosted by higher prices from newly introduced models such as the Buick LaCrosse, a midsize luxury sedan.Story: GM hopes investors buy turnaround story
They also were another indication of a widespread recovery among global automakers. Toyota, Honda, Nissan, Chrysler and Ford all reported improved results in the most recent quarter as auto sales slowly rise.
The strong quarter meant that GM met projections it made a week ago that net income for the quarter would be $1.9 billion to $2.1 billion.
More must-see stories
It was the third-straight profitable quarter for GM, which needed $50 billion in U.S. government aid to make it through bankruptcy protection last year. The company has repaid or plans to repay taxpayers $9.5 billion, and the government hopes to get back the remaining $40 billion with the Nov. 18 common stock offering and several follow-up sales.
The latest results reversed a $908 million loss, or 73 cents per share, in the third quarter of last year, a short quarter for GM because it spent the first nine days in bankruptcy protection.
The Detroit automaker posted $34.1 billion in revenue for the July-through-September quarter, up 35 percent from the $25.1 billion in the shortened period last year. GM had said last week that revenue could reach $34 billion for the quarter.
Revenue has been steadily increasing this year, largely due to gains in North America and explosive sales growth in China.
For the quarter, GM reported strong profits in all of its regions but Europe, where it lost $559 million. The company reported $2.1 billion in profits from North America, and its international operations, including Asia and Latin America, made $646 million.
The earnings per share figure for the quarter was adjusted for a three-for-one stock split approved by GM's board last week in advance of the initial public offering.
The third-quarter earnings come in the middle of a two-week "road show" in which GM executives are fanning out to U.S. and European money centers to sell investors on the upcoming IPO. The positive third-quarter performance should help them make their case.
But investors likely will have questions about the losses in Europe and how GM will handle increasing competition that's coming in the U.S. for several key GM models. For example, the new Chevrolet Cruze compact now is the newest car in its class in the U.S., but Ford, Honda and others soon will unveil strong new products.
Another problem that surfaced in GM's earnings report: its global market share fell to 11.5 percent from 11.9 percent in the third quarter of 2009. The company said its share partly declined because it saw fewer sales to rental, corporate and government fleets. Fleet sales accounted for a little more than a quarter of the company's sales in the latest period, compared with 34 percent of its sales in the second quarter.
GM said it ended the quarter with $35.8 billion in cash, up from $33.6 billion in the previous quarter, and $8.6 billion in debt, up from $8.2 billion. GM said the increase in debt was primarily due to unfavorable fluctuations in currency, including a stronger Canadian dollar and a weaker British pound.
The company also said it made a second-quarter accounting mistake involving devalued Venezuelan currency, reducing cash by $199 million. GM says it doesn't consider the error to be material. GM has been plagued by accounting errors and has listed lax financial controls as a risk factor in its IPO.
In the stock sale, three of GM's four owners — the U.S. government, Canadian and Ontario governments and a union health care trust — will sell 365 million shares, or about a quarter of the company's outstanding common stock, for between $26 and $29 a share. The IPO will raise about $10 billion for the three owners and allow the largest, the U.S. government, to reduce its stake in the company from 61 percent to just over 40 percent.
The reduced stake is symbolically important for GM, because some Americans resented the company's taxpayer funded bailout. The perception that GM stood for "Government Motors" has hurt the company's car sales, GM has claimed.
The U.S. Treasury will sell 264 million shares and will make about $7 billion if the shares sell in the middle of the $26 to $29 price range. The Canadian governments and union trust are expected to make about $3 billion.
GM also plans to raise $3 billion by selling 60 million preferred shares for $50 each. The preferred shares pay a set dividend and become common stock in three years. GM will use the money to shore up its pension plans and pay debt.
For the first nine months of the year, GM made $4.2 billion, a dramatic turnaround from gigantic losses of previous years. In the four years before the 2009 bankruptcy, GM lost more than $80 billion because it was saddled by enormous debt and costly labor contracts. But the debt was dramatically reduced and labor costs were cut in the government-funded restructuring, and now GM is smaller and leaner. The automaker also cut four brands to focus precious marketing dollars solely on Chevrolet, Buick, Cadillac and GMC.
Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.