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GM returns to be profitable with better than expected earnings



America’s largest automaker posted earnings of $ 4.1 billion, excluding specialty items, up from $ 2.5 billion on that basis a year earlier. It’s much better than the $ 2.1 billion that analysts had forecast – and up 64% from the earnings GM announced in the third quarter a year ago.

Revenue was essentially unchanged at $ 35.5 billion, consistent with the forecast. GM was able to maintain sales despite a 4% drop in worldwide vehicle sales. Auto factories shut down earlier this year because of health regulations left limited inventory of cars for sale, and the economic slowdown also hurt demand, especially from some car buyers. like car rental companies.

But demand there has driven the average prices of vehicles higher, allowing GM to maintain steady sales.

John Stapleton, GM̵

7;s Interim CFO said: “Sales in the US and China are recovering faster than many would expect and GM is benefiting from strong customer demand for categories. our new vehicles and services, especially our pickup trucks and full-size SUVs ”.

But the real improvement came from the company’s margins, which rose to 14.9%, up from 8.4% a year ago.

GM halted dividends in April and increased debt as a way to maintain cash during a pandemic-induced recession. But they announced on Thursday that they could pay off a $ 5.2 billion credit line in the third quarter and an additional $ 3.9 billion by October. The company is expected to reimburse the balance on end of the year.

CEO Mary Barra said that if the current rebound continues, GM will likely continue to pay dividends in mid-2021.

“We know this is a high priority for our shareholders,” she said in a call with analysts.

But the company is still relatively cash-rich. It generated $ 9.1 billion cash flow from its auto operations during the quarter, leaving auto operations with $ 30.2 billion in cash at the end of the quarter, up from $ 17.3 billion on the beginning of the year, before Covid-19 disrupted the economy.

And that cash generation is giving GM the cash it needs to invest in factories and new products, such as electric cars.

“Our North American business, and in particular the strength of a full-size truck platform … and full-size SUVs, provide us with an excellent opportunity to self-finance her development in [electric vehicles]”, Says Barra.

Shares of these American automakers are on the rise.  None of them are Tesla
But even as GM prepares to move into an all-electric future, it is still investing in producing more gasoline-powered vehicles, such as SUVs and full-sized pickups.
On Thursday, the company announced plans to invest up to $ 1 billion in its Oshawa plant, Ontario, to begin making pickup trucks in early 2022. The investment is made as part of A labor agreement was reached on Thursday with Unifor, the union representing Canada’s auto workers, including GM plans to hire 1,400 to 1,700 workers. The Oshawa factory is one of five factories that GM said in November 2018 that it plans to close, along with four factories in the US, to save costs.

“We operated our large pickup plants around the clock to meet particularly strong demand for Chevrolet Silverado and GMC Sierra in the US and Canada,” says Barra. “When the plant is back up and running in early 2022, we will see a significant increase in our production capacity of full-size pickup trucks.”

Shares of GM (GM) up about 4% in mid-day trading with news.

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