N. America and China drive GM 1Q profits
by Tom Krisher and Dee-Ann Durbin
Associated Press Writers
May 04, 2012 12:00 AM | 290 views | 0 0 comments | 2 2 recommendations | email to a friend | print
DETROIT — Strong sales in North America and China are generating big profits for General Motors. Now the company needs the rest of the world to play along.

GM’s net income totaled $1 billion in the first quarter as it sold more vehicles at higher prices in the U.S. But the earnings fell 69 percent from a year earlier. The reasons: Big one-time charges and high operating costs in Europe, and lackluster earnings in South America.

For GM to continue its rebound from bankruptcy three years ago, it needs Europe and South America to improve, especially if North American sales slow.

So far, the story of GM’s comeback from near collapse has been North America, where the company earns most of its money, and China, where it sells its greatest number of cars. In North America, GM has slashed costs, introduced hot-selling cars and improved its reputation for quality. That success continued in the first quarter, when the automaker posted a $1.7 billion pretax profit in North America. It also did well in Asia, where it made $529 million in the first three months of the year.

But it’s a different story in Europe, where GM lost $256 million, and South America, where earnings fell 8 percent to $83 million.

In Europe, GM’s biggest cash drain, costs are too high and new products are needed. Prospects are poor as the economy slips into recession, scaring the middle class away from buying cars. GM has pledged to fix the troubled unit, but anything it does will be overshadowed by high unemployment and austerity measures to cut government debt in many countries.

GM hasn’t released specifics about restructuring, and Chief Financial Officer Dan Ammann says there won’t be one magic answer.

“I’m not sure there’s going to be a big bang,” Ammann said Thursday. “It’s a series of actions that we’re taking.”

GM’s costs in Europe are high because of contracts with powerful labor unions and laws that make closing a factory difficult. The future was so bleak just three years ago that GM tried to sell the unit, but the deal was scuttled by the GM board.

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