General Motors (GM) - Get Report posted stronger-than-expected third quarter earnings Tuesday, but noted a forty-day strike by United Auto Workers union members at the biggest U.S. carmaker would hit profits by $2.9 billion.
GM said adjusted diluted earnings for the three months ending in September came in at $1.72 per share, down 8% from the same period last year but well ahead of the Street consensus forecast of $1.31 per share. Group revenues, GM said, slipped 0.9% to $35.5 billion but were firmly ahead of analysts' forecasts of a $33.8 billion tally.
The UAW strike cost GM $1 billion in the third quarter, the company said, and will hit 2019 profits by $2.9 billion, a figure that will force the automaker to cut its full-year adjusted profit forecast to a range of $4.50 to $4.80 per share from a prior estimate of between $6.50 and $7 per share. Adjusted automotive cash flow will also be lower, GM said, coming in at $5.5 billion to $7.5 billion from a prior range of $4.5 billion to $6 billion.
"Our new labor agreement maintains our competitiveness, preserves our operating fexibility and allows us to continue improving our quality and productivity," said CEO Mary Barra. "We remain focused on strengthening our core business and leading in the future of personal mobility."
GM shares were marked 5% higher at the start of trading following the earnings release to change hands at $38.47 each, a move that would extend the stock's year-to-date gain to around 15%.
"The work stoppage in the U.S. negatively afected North American business results in the third quarter and expected results for the year," GM said."In the third quarter, about two weeks of vehicle production was lost. We expect the 2019 calendar-year impact of the strike to be approximately $2.00 per diluted-share."
Despite the UAW strike, GM North America was able to grow adjusted earnings by 7.1% to $3 billion as HS pickup and crossover sales offset the work stoppage impact. Chine earnings, however, fell by $200 million from last year "Driven by lower wholesales, partially ofset by favorable mix including from product launches."
Earlier this month, GM said sales in China, the world's biggest car market, fell 17.5% over the three months ending in September, the fifth consecutive decline that takes its nine-month total to around 2.26 million.
Slowing growth in China, as well as the impact of its year-long trade dispute with the United States, has clipped American carmarker's share of the China market to just under 10%, according to official industry data, while German and Japanese rivals have seen solid year-to-date gains.