General Motors' profits in Asia plummeted in the first quarter, but the first hints of a rebound are starting to become visible in China, the automaker's most important Asian market, company executives and analysts said on Tuesday.
Automakers post profits based on their sales to independent dealers, not the dealers' sales to the public. GM cut its shipments to dealers in China by half in January and February, mostly blaming inventories of unsold cars that swelled as the government tried to slow the economy to a more sustainable pace.
But the number of vehicles that GM ships to dealers recovered last month, rising 12 percent from a year earlier, according to company figures released late on Tuesday. Retail sales by dealers have also been strong lately, climbing 11 percent in March.
PHOTO: GM/THE NEW YORK TIMES
"There's a mix issue; we didn't sell as many Buicks" in the first quarter, said Troy Clarke, a group vice president of GM and president of its Asian operations.
He added, however: "This is not an unexpected shift. Our operations are profitable."
The Chinese market is becoming more competitive for GM, which has 10 percent of the market, the second-largest share after Volkswagen.
Toyota, Honda, Nissan and Hyundai are expanding quickly in China. The Ford Motor Co., which was slow to enter the Chinese market in the 1990s, is now racing to catch up as well.
As part of its earnings announcement in the US on Tuesday, GM said that its Asian operations posted a profit of US$60 million in the first quarter of this year. That was down from US$275 million a year earlier, a decline GM attributed mainly to lower earnings in China and Japan.
GM's performance in China is important as the company struggles to reverse losses in its North American vehicle operations and tries to persuade credit rating agencies not to downgrade its debt to junk status.
The Detroit-based company reported a US$1.1 billion first-quarter loss on Tuesday that it blamed on a stark turnaround in its North American operations. It also said it was no longer certain enough of its outlook to provide earnings guidance for the full year.
"The results at GM North America were clearly disappointing," Rick Wagoner, GM chairman and chief executive, said in a statement on Tuesday. "We have well thought-out plans to address GMNA's poor performance, starting with aggressive product introductions this year, value-focused marketing initiatives and further reductions in our cost structure."
The loss was in line with GM's profit warning of last month that sent the company's shares to a 12-year low and led to a shakeup of its North American management.
GM's US$1.1 billion net loss was all the more stark in comparison with a US$1.2 billion net profit in the first quarter of last year.
Special items included charges for restructuring the company's troubled European operations and accelerated retirement packages offered to US white collar workers. The company's share of the North American market fell to 25.2 percent from 26.3 percent a year ago.
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