Strong truck sales drove the automaker's profit in North America to a record high, but costs associated with its ignition switch recall cut into its overall profit. Fred Katayama reports.
Cheap gas and Americans' love affair with trucks and sport utilities drove GM's quarterly profit in North America to a record high. The $1.5 billion in costs related to its faulty ignition switch recall and government penalties offset much of that, so the automaker produced flat profit overall. Revenue slipped. But GM says it would have risen were it not for the mighty dollar and the slowdown in Brazil. Vehicle sales in South America fell by a third. In China, GM's sales fell, but its profit margin improved because it sold higher priced SUVs and luxury cars. GM's earnings blew past expectations. Its shares rose in early trading, erasing some of their 4 percent loss this year. UBS analyst Colin Langan said, "Excellent quarter. It shows that a lot of their cost cutting initiatives are working ... And in China, management is boosting its credibility when talking about improving profit where people were worried about volumes." Looking ahead, GM said it expects to hit its profit margin target in North America a year ahead of forecast. That's the region that generates nearly three-fourths of its revenue.