GM Earnings: Congrats on the $2B Profit. Now Sell Some New Cars
General Motors posted a decent profit of just under $2 billion in the third quarter, but in light of its impending initial public offering, GM warned that profit growth will slow significantly in the fourth quarter.
GM hastened to add that the fourth-quarter slowdown is for what would be a routine reason in a routine year. That is, GM will be spending heavily to launch and to promote new products in the fourth quarter. Which, all things considered, is a good thing.
For instance, the Chevy Cruze went on sale in September. The long-awaited Chevy Volt goes into mass production this month, with sales set to begin just before the end of December. Everything else may change, but it still takes tons of money to design, build, ship and promote cars once they land at dealerships.
Of course, it's anything but a routine year. GM issued the fourth-quarter warning today so as not to spook would-be investors who are weighing GM's IPO as we speak. GM is going public again after a bailout by the U.S. and Canadian governments, and a quickie, structured bankruptcy last year. According to published reports, Nov. 18 is the big day for the GM IPO.
The good news, which naturally GM chose to emphasize today, is that GM achieved its third consecutive profitable quarter. In addition, GM still expects to post its first profit for an entire year for the first time since 2004. The bad news is, "OId GM" had total net losses of more than $80 billion from 2005 to 2008.
But an awful lot has changed in the world of GM since then. For starters, GM has cut headcount in North America by 26 percent, or 37,000 jobs, and that's just since 2007. GM is also under new top management.
However, the third-quarter announcement also shows that some things don't change -- it still takes money to make money in the auto industry, and launching new products is an expensive undertaking.
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- To Sell GM's IPO, Whitacre Needs to Show One Year of Success Was No Fluke