GM profit up 15%, but higher spending takes a bite out of revenues

General Motors (GM) reported that the company’s sales increased by 15% to US$36.2 billion for the first quarter of 2011, higher than Wall Street expectations of US$35.6 million.  However, investors were disappointed by the higher costs for incentives, marketing and engineering to the tune of US$700 million.  Analyst David Whiston said, “It’s great that they beat consensus, but it’s troubling to see them not get any help … from pricing. That’s quite a contrast from Ford, which is getting improvements from both volume and pricing. GM’s only getting help from volume right now.”  CFO Dan Ammann said, “From our point of view, it’s a solid quarter.  It’s good progress.”  Chief Executive Daniel Akerson does however acknowledge the need to address rising costs.  He said GM will have an “intense focus” on costs in the future.  General Motors filed for bankruptcy in 2009 but was bailed out by the U.S. government which still owns 43% of the common shares.  GM’s sales in the U.S. were up 26% in April, while net income reached US$3.2 billion or US$1.77 per share.  Ammann said that the industry’s shift to smaller, fuel-efficient vehicles could result in a reduction in truck production. (May 5, 2011)