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USA: GM earnings top expectations, but cuts forecast after strike

General Motors reported better-than-expected earnings on strong auto sales, but trimmed its full-year forecast due to the hit to the bottom line from the lengthy strike that ended last week / © AFP/File

Author: AFP|Update: 29.10.2019 14:19 

General Motors reported better-than-expected earnings Tuesday on strong auto sales in the latest quarter, but trimmed its full-year forecast due to the hit to the bottom line from the lengthy strike that ended last week.

The automaker saw net income in the third-quarter drop 7.1 percent to $2.4 billion, easily topping Wall Street estimates, as revenues dipped 0.9 percent to $35.5 billion.

But the company said the strike, which effectively shut down GM’s US operation for 40 days, is expected to cut about $3 billion from 2019 earnings.

The strike, which ended Friday after the United Auto Workers ratified a new contract, cut $1 billion from operating earnings in the third quarter alone and also will hit the fourth quarter.

Workers won an $11,000 ratification bonus, wage increases and a freeze on health care costs in exchange for acceding to GM’s plans to permanently shut four plants.

GM’s investor materials touted the agreement as a good compromise and said it would also permit the company to “adjust workforce in response to changing industry levels.”

Chief Financial Officer Dhivya Suryadevara told reporters sales in North America were “solid” and despite the strike, “the underlying business was strong this quarter.”

The company pointed to especially good sales of new pickup and sport utility vehicle models.

GM now forecasts full-year earnings per share of $4.50 to $4.80 per share, down from the prior range of $6.50 to $7.00 per share.

Shares rose 1.5 percent to $37.20 in pre-market trading.

Source: rtl.lu

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