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GM profit dips on truck changeover, but beats estimates

DETROIT — General Motors on Thursday reported a higher-than-expected quarterly profit despite a drop in production of high-margin pickup trucks, as it gears up for new models that are expected to boost profits next year. Like rivals Ford and Fiat Chrysler Automobiles, GM is banking on highly-profitable Chevy Silverado and GMC Sierra pickup trucks to lift profits, as consumers shift away from traditional passenger cars in favor of these larger, more comfortable trucks, SUVs and crossovers. During the first quarter, the process of changing over to GM's new pickups resulted in a drop in production of 47,000 units. GM Chief Financial Officer Chuck Stevens said the production drop had resulted in a drop in pre-tax profit of up to $800 million. Earlier this year, GM said its 2018 profits would be flat compared with 2017, but expected its all-new pickup trucks would boost margins starting in 2019. On Thursday, GM reiterated its full-year 2018 forecast for adjusted earnings in a range from $6.30 to $6.60 per share. The automaker said capital expenditures were more than $500 million higher in the quarter because of investments its new pickup trucks and a family of low-cost vehicles under development with Chinese partner SAIC Motor Corp. On Wednesday, rival Ford said it would stop investing in most traditional passenger sedans in North America. CFO Stevens told reporters on Thursday that GM has "already indicated that we will make significantly lower investments on a go-forward basis" in sedans. 2019 GMC Sierra View 21 Photos GM benefited from a lower effective tax rate in the quarter, but adjusted pre-tax margin fell to 7.2 percent from 9.5 percent a year earlier. Stevens said the company's profit margin should hit 10 percent or higher in the second quarter and for the full year. GM said material costs were $700 million higher in the first quarter, and it expects those costs to continue rising. The automaker said it would counter those increases with cost cutting measures. "It is a more difficult environment than it was three or four months ago," Stevens said when asked about rising commodity prices from potential steel and aluminum tariffs announced by the Trump administration. "But we are confident we can continue to offset that." The company reported quarterly net income of $1.05 billion or $1.43 per share, a drop of nearly 60 percent from $2.61 billion or $1.75 per share a year earlier. Analysts had on average expected earnings per share of $1.24.

GM won't pay owners of recalled cars for lost value

Kenneth Feinberg, the man in charge of the General Motors compensation fund dealing with the its widespread ignition switch woes, has issued an informal, two-letter response to the plaintiffs in more than 70 lawsuits seeking redress for lost resale value of their Cobalts: "No." The cases were recently combined into one, but Feinberg told The Detroit News that the fund will deal "only with death and physical injury claims," and that "perceived diminished value" will get no consideration.
ALG, the firm specializing in establishing residual values, determined that Cobalt owners had lost $300 compared to the segment competition and doesn't envision any long-term effects from the recall situation. Feinberg's statement comes in advance of public details on how the compensation fund will work and adheres to GM's long-held position on the matter. The company has already asked a judge to throw out such suits using the pre-bankruptcy defense, even as it stopped using that defense in cases of injury and death.
With plenty of potential gain from the GM suit, however, don't expect the plaintiffs to give up yet. When Toyota was sued for the same reason during the unintended acceleration debacle, it eventually settled the case for between $1 billion and $1.4 billion just to get it over with. Since the 85 law firms involved in the Toyota litigation took home more than $250 million of that total, we shouldn't expect the attorneys to give up on a GM payout, either.

Smaller Cars Endure Big Problems On Crash Test

In a crash test of 11 of the smallest cars on the market, only one vehicle received an acceptable rating. The rest received marginal or poor ratings in the study, providing evidence that supports a widely held notion that smaller cars are among the least safe on the road. No other vehicle group has performed as poorly on a new crash test than these mini cars, says the Insurance Institute for Highway Safety, the nonprofit group that conducted the testing. The latest results of which were released Wednesday. The Chevrolet Spark was the only car earning an overall "acceptable" rating on the small-front overlap test, and even that vehicle had its shortcomings, IIHS said. "Small lightweight vehicles have an inherent safety disadvantage," said Joe Nolan, the senior vice president for vehicle research at IIHS. "That's why it's even more important to choose one with the best occupant protection. Unfortunately, as a group, minicars aren't performing as well as other vehicle categories." The Mazda2, Kia Rio, Toyota Yaris and certain Ford Fiesta models all received "marginal" overall grades on the test, while the Mitsubishi Mirage, Nissan Versa, Toyota Prius C, Hyundai Accent, Fiat 500 and Honda Fit all earned "poor" ratings. Results from these sub-compact cars fare much worse than vehicles sized just a little bit bigger, IIHS said. Among 17 cars evaluated in the small category, five earned "good" ratings and five more earned "acceptable." Only introduced a year ago, the small-front overlap test has quickly become a key indicator of differences in automotive safety. IIHS introduced it as a way to replicate what happens when the front corner of a vehicle collides with a tree or utility pole at 40 miles per hour. In the real world, these sorts of accidents are more dangerous than others, in part because they bypass the front-end crush zones on most cars. TOP 5Most Researched Sedans 2013 Honda Accord MSRP : $21,680 2013 Hyundai Sonata MSRP : $20,895 2013 Nissan Altima MSRP : $21,760 2014 Honda Accord MSRP : $21,955 2013 Toyota Corolla MSRP : $16,230 Automakers have been rushing to make design changes to the front ends of their cars. Without a grade of acceptable or better, they cannot qualify for the IIHS' overall Top Safety Pick+ honor, given annually to the safest models on the market.