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FILE - This April 1, 2014 file photo shows the ignition switch of a 2005 Chevrolet Cobalt in Alexandria, Va. General Motors reports quarterly earnings on Thursday, April 24, 2014. (AP Photo/Molly Riley)
GM 1Q profit dragged down by recalls
First Published Apr 24 2014 09:12 am • Last Updated Apr 24 2014 04:21 pm

Detroit • General Motors on Thursday reported its worst financial results in more than four years as the costs of a series of recalls dragged down earnings.

First-quarter profit fell 86 percent to $125 million as the Detroit automaker took a $1.3 billion charge for recalling about 7 million vehicles worldwide. GM also incurred $300 million in restructuring costs, mostly in Europe. And it took another $419 million charge due to a change in the way it values Venezuela’s currency.

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GM made 6 cents per share, down from 58 cents per share a year ago. The recall charge alone cut 48 cents off the company’s first-quarter earnings.

But excluding one-time items, GM made 29 cents per share, far above Wall Street estimates of 3 cents per share. Shares rose 3.7 percent to $35.66 in premarket trading.

The bottom line result was GM’s worst since late 2009, when it posted a $4.4 billion loss for the five months after leaving bankruptcy protection. It was a rough start to what many expected would be a strong year for the Detroit automaker.

The U.S. government, which bailed out the company five years ago, sold its remaining stake in the company at the end of last year, freeing GM of the "Government Motors" nickname. In January, the company announced its first quarterly dividend in six years. And GM has rolled out multiple new models in recent months including high-profit pickup trucks and full-size SUVs.

But the recalls overshadowed the first quarter under the leadership of new CEO Mary Barra. GM is recalling 2.6 million older small cars because the ignition switches can slip from "run" to "accessory" or "off," shutting down the engine. That knocks out power steering and brakes and can cause drivers to lose control and crash. It also disables the air bags.

GM admitted knowing about the ignition switch problem at least a decade ago. Thirteen people have died in crashes linked to the problem, according to GM, although relatives of the victims say the death toll exceeds 30.

GM announced other recalls that pushed the total to near 7 million cars and trucks.

"Clearly the headline results are overshadowed by the recall charges," Chief Financial Officer Chuck Stevens said.


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Without the recalls, GM would have had a strong quarter. The company’s revenue grew 1.3 percent from a year ago to $37.4 billion, in line with analysts’ estimates.

GM’s global sales for the quarter rose 2.3 percent to 2.42 million cars and trucks. China sales grew 13 percent, and sales in Europe rose less than 1 percent. But sales fell 2 percent in North America, GM’s most profitable region, and they dropped 10 percent in South America.

The company’s North America division earned $600 million. Without the recall charge, it would have earned $1.9 billion, up from $1.4 billion a year ago.



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