General Motors Co. posted a surprisingly strong profit on Wednesday and said it was targeting a return to break-even levels in its European operations by mid-decade after a loss of as much as $1.8-billion (U.S.) in that region this year.
“We still have a lot of work to do, especially in Europe,” GM Chief Financial Officer Dan Ammann said in a statement.
GM’s third-quarter net income attributable to common shareholders fell to $1.48-billion, or 89 cents a share, from $1.74-billion, or $1.03 a share, a year earlier.
Excluding one-time items, GM earned 93 cents a share, far above the analysts’ average estimate of 60 cents, according to Thomson Reuters I/B/E/S. Earnings in the company’s North American and international units came in above expectations.
Revenue rose to $37.6-billion from $36.7-billion. Analysts had expected $35.7-billion.
GM said it expected a full-year operating loss of $1.5-billion to $1.8-billion in Europe, depending on the level of restructuring in the fourth quarter. Last year, it lost $747-million in the region.
The company, which sells in Europe largely under the Opel brand name, said it was targeting results there to be slightly better in 2013 than in 2012 and to reach break-even by mid-decade.
GM still sees the European economy as flat to slightly deteriorating. “We’re not banking on a sharp turnaround ... at this point,” Mr. Ammann told reporters on a conference call.
Opel has been a drag on GM’s results, leading the automaker to push for changes at the European unit, which has lost a total of $16 billion over the past dozen years despite repeated rounds of job cuts. In the third quarter, GM Europe posted an operating loss of $478-million, in line with what analysts had expected.
GM said Vice Chairman Steve Girsky, who is leading the restructuring of Opel, will provide more details of the turnaround efforts there on a conference call with analysts later on Wednesday.
For the fourth quarter, GM said it expected operating earnings similar to or slightly better a year earlier.
This quarter could benefit from a reversal of a significant portion of a tax reserve, known as a valuation allowance, on U.S. and Canadian deferred tax assets. At the end of September, those cumulative allowances totaled almost $39-billion combined, and eliminating some of that would reflect a confidence in the company’s financial prospects.