Friday, April 25, 2014

General Motors Q1 Profits Down Big on the Heels of Ignition-Switch Recall

GM Struggles to Bust Profit in Q1

Were it not for the ignition-switch recall with all those annoying investigations and people clamoring for rental cars, General Motors would have paid out at least 48 cents more per share by the end of the first quarter.

That amount, roughly speaking, is what GM decided its customers weren't worth when engineers proposed a redesigned ignition switch in 2005. GM was still profitable during the first three months of this year, but only by the ink on a dollar bill. Its $125 million profit was down about 85 percent versus the same period in 2013, mostly due to the $1.3 billion in recall-related charges GM took on its statements. And this is likely only the tip of GM's recall-cost iceberg. Super negotiator Kenneth Feinberg is mulling a victim settlement fund which could easily top $1 billion, the Department of Justice is seeking more blood after fining Toyota in a criminal settlement to the tune of $1.2 billion, and lawsuits against GM will be popping up like spring dandelions.



Still, the General's in good health. It's been profitable for 17 consecutive quarters, an impressive stat for financial analysts with short memories of the company's four-year ownership by the U.S. Treasury, and sales are strong. In first quarter global sales, GM finished second at 2.42 million vehicles sold, a 2 percent jump versus 2013 and ahead of Volkswagen's 2.40 million. Toyota's lead was comfortable, at 2.58 million. Cadillac sales were up 9 percent and GM broke its Chinese-market record with 1 million deliveries in the first quarter. By comparison, Ford raked in a $989 million profit (a 39-percent drop from 2013) and built (but not entirely sold) about 1.6 million cars. Chrysler had not released its financial results at press time.



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