General Motors reported slumping first quarter profits, dragged down by hefty recall charges that eclipsed a strong core operating performance.
The largest US automaker’s first-quarter net income sank 85% from a year ago to $125mn as the company took a $1.3bn charge for the recall of sevenmn vehicles worldwide.
The Detroit, Michigan-based company also took a $300mn charge for restructuring costs, mostly in Europe, and incurred costs related to the exchange rate it uses for Venezuela’s currency.
Earnings per share were six cents, down from 58 cents a year ago but beating Wall Street estimates of four cents.
Revenue rose 1.3% to $37.4bn, missing expectations of $38.43bn. But net cash from automotive operating activities increased four-fold from a year ago to $2.0bn. The company also made progress in paring losses in its Europe segment, when stripping out restructuring costs. Operating income was lower in the international segment and fell into negative territory in South America. Of the 2014 challenges it faces, GM cited the recall impact on the US market, currency headwinds in Russia and South America, and Venezuela’s political and market volatility.
The $1.3bn first-quarter charge for recalls included a $700mn expense for the 2.6mn cars recalled worldwide for faulty ignition switches and ignition cylinders.