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Abu Dhabi, UAEThursday 22 November 2018

General Motors' earnings speed ahead of forecasts

Despite slowing sales in China US car maker still able to report record equity income in the quarter from its operations there

General Motors has had a strong quarter particularly in North America. AFP
General Motors has had a strong quarter particularly in North America. AFP

General Motors on Wednesday posted far stronger than expected quarterly profit and said its full-year earnings forecast would come in at the high end of its forecast due to strong demand in North America, driven by its new pickup trucks.

GM shares jumped more than 8 per cent in pre-market trading.

The Detroit car maker was able to push through higher pricing, mostly in North America, allowing it to benefit by $1 billion in the quarter, offsetting higher commodity costs. Those pricing gains are "absolutely sustainable", said GM chief financial officer Dhivya Suryadevara.

"We had strong execution despite the challenges that we faced. Revenues up, profits up, margins up," Mr Suryadevara said at the company's Detroit headquarters.

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Slowing demand in China, the world's largest car market, has begun to hurt the auto industry, but GM still was able to report record equity income in the quarter from its operations there. With U.S. interest rates rising and the region having seen strong industry sales for several years, many believe U.S. demand also will begin to slow.

The buiggest US car maker said it still sees a full-year profit in the range of $5.80 to $6.20 a share, but said it now expected to finish at the high end of the range with potential to finish even higher. It cited a favorable tax rate and its strong performance.

In July, GM lowered its full-year forecast, citing higher steel and aluminium costs due to tariffs imposed by US President Donald Trump's administration.

GM reported third-quarter net income of $2.53 billion, or $1.75 a share, compared with a loss last year of $2.98bn, or $2.03 a share. Last year's quarter included a charge related to Europe.

Excluding one-time items, GM earned $1.87 a share in the third quarter, easily beating the $1.25 analysts polled by Refinitiv estimates had expected.

Revenue in the quarter rose 6.4 per cent to $35.8bn, above the $34.85bn analysts had expected.