General Motors Co posted a smaller-than-expected quarterly profit yesterday as weakness in South America and Russia hurt demand and the company’s tax rate was higher than expected, sending shares down 4%.
“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 US automaker has cut jobs and will reduce production shifts at plants in Brazil. He said the actions will generate about $200mn in annual savings. GM lost $214mn 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% profit margins in North America and return to profitability in Europe.
First-quarter net income rose to $945mn, or 56 cents a share, from $125mn, or 6 cents a share, a year earlier. Last year’s results included charges related to recalls including those from a defective ignition switch.
Revenue fell 4.5% to $35.7bn, below the $37.6bn 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 US dollar. GM said in March it would shut a Russian factory and wind down its Opel brand there due to slumping demand. In North America, GM earned $2.18bn and reported profit margins of 8.8% due to strong demand for large pickups and SUVs, and lower costs. However, pricing was a $600mn drag on earnings, mostly due to auction sales of a large number of rental vehicles.
