General Motors on Thursday reported its worst quarterly performance in more than four years as the costs of a series of recalls dragged down earnings.
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First-quarter profit fell 86 per cent to $125 million. The Detroit automaker took a $1.3 billion US charge for recalling about seven million vehicles worldwide. GM also incurred $300 million in restructuring costs, mostly in Europe. And it took another $419 million charge due to a change in the way it values Venezuela's currency.
GM made six cents per share, down from 58 cents per share a year ago. The recall charge alone cut 48 cents off GM's first-quarter earnings.
Excluding one-time items, GM made 29 cents per share, far above Wall Street estimates of 3 cents per share.
It was a disappointing start to what many expected would be a strong year for GM. The U.S. government, which bailed out the automaker five years ago, sold its remaining stake in the company at the end of last year, freeing GM of the "Government Motors" nickname. In January, the company announced its first quarterly dividend in six years. And GM has rolled out multiple new models in recent months including high-profit pickup trucks and full-size SUVs.
Recalls overshadow fresh start
But the recalls overshadowed the first quarter under the leadership of new CEO Mary Barra, the first woman to lead a major automaker. In February, GM announced it would recall more than a million older small cars because the ignition switches can slip from "run" to "accessory" or "off," shutting down the engine. That knocks out power steering and brakes and can cause drivers to lose control and crash. It also disables the air bags. Later, the recall was expanded to 2.6 million cars, and other recalls took the number to near 7 million.
GM admitted knowing about the problem at least a decade ago. Thirteen people have died in crashes linked to the problem, according to GM, although relatives of the victims say the death toll exceeds 30.
The financial results were GM's worst since late 2009, when it posted a $4.4 billion loss for the five months after leaving bankruptcy protection.
Even so, the company's revenue for the quarter was strong. GM took in $37.4 billion, up 1.3 per cent from the year-ago quarter and in line with analysts' estimates.
Global sales up
GM's global sales for the quarter rose 2.3 per cent to 2.42 million cars and trucks. China sales grew 13 per cent, and sales in Europe rose less than 1 per cent. But sales fell 2 per cent in North America, GM's most profitable region. Sales fell 10 per cent in South America.
The company's North America division earned $600 million. Without the recall charge, it would have earned $1.9 billion, up from $1.4 billion a year ago. Sales in the region fell to 745,000 cars and trucks.