DETROIT (AP) — First-quarter profit at General Motors rose nearly eight times above a year ago as U.S. consumers spent big on pickups and SUVs and the company didn't have to set aside a huge stack of money to pay for recalls.
The Detroit automaker said it made $945 million, as consumers got used to lower gasoline prices and decided to buy bigger vehicles. That's right in GM's sweet spot, with trucks such as the Chevrolet Silverado pickup and Cadillac Escalade large SUV. Profit margins on the trucks are sizeable, with analysts estimating that GM makes more than $10,000 per vehicle.
In the U.S., where GM still makes most of its money, the company sold more than 198,000 pickups, the best first quarter for the vehicles in eight years, according to Ward's Automotive. The company also sold nearly 55,000 big SUVs, the best January-through-March period in seven years. It's cheaper to fuel a big vehicle. Gas prices have now been $3 per gallon or lower for six months. Regular was around $2.49 Thursday, according to AAA, compared with $3.67 a year ago.
The increased profit on trucks is "clearly a favorable tailwind," Chief Financial Officer Chuck Stevens said, boosting GM's bottom line by $500 million during the quarter.
For the quarter, the average price of a Chevy Tahoe SUV rose 8 percent to more than $57,000, Kelley Blue Book said. Other truck-based SUVs saw similar or even larger increases.
Although pickup and SUV sales were strong, they were nowhere near the peaks of the previous decade. Pickup sales last quarter were the best since 2007, when GM sold almost 243,000. Big truck-based SUV sales were the best since 2008 at nearly 107,000.
GM's profit amounted to 56 cents per share, compared with only $125 million, or 6 cents per share a year ago. In last year's first quarter, a $1.3 billion charge for an embarrassing series of recalls — including one for a deadly ignition switch problem — diluted the profit.
The company did take a one-time pretax charge of $100 million to add to its compensation fund for victims of crashes caused by faulty ignition switches. It also incurred a $400 million charge to cut operations in Russia. Excluding the one-time items, GM would have made 86 per share. That fell short of Wall Street expectations. Analysts polled by FactSet expected earnings of 95 cents per share. Revenue for the quarter fell nearly 5 percent to $35.7 billion on weakness in foreign currencies and sales declines in South America and Russia.
The miss drove GM shares down 3.1 percent in premarket trading to $36. Shares are up about 4 percent so far this year.
There were some other rough spots as well. GM's global sales rose only 2 percent for the quarter, and its U.S. passenger car sales were down nearly 19 percent at just under 92,000.
The company has now set aside $550 million to pay victims of crashes caused by defective small-car ignition switches. So far compensation expert Kenneth Feinberg has deemed 87 deaths eligible for compensation, as well as 157 injuries. GM had previously set aside $400 million, but said it could go as high as $600 million. Stevens said the top end estimate remains the same.
In North America, by far GM's most profitable region, the company made a first-quarter record of $2.18 billion before taxes, four times higher than a year ago. The company's North American profit margin — the percentage of revenue it gets to keep — rose to 8.8 percent, the seventh straight quarter of year-over-year margin growth.
In Europe, the company's loss narrowed by $45 million to $239 million, which Stevens attributed to higher profits on revamped vehicles. The company still expects to post a pretax profit there next year.
The company agreed in March to a $5 billion stock buyback program at the behest of activist investors. Through Wednesday, it had bought back 19.4 million shares for roughly $700 million.