GM earnings draw mixed reviews, as company executives vow to cut business costs to improve performance

on Wednesday, November 9, 2011

GM earnings draw mixed reviews, as company executives vow to cut business costs to improve performance The resurgence of the U.S. automobile industry has been one of the few bright spots in the nation's lopsided economic recovery. Still, though General Motors has fought back from insolvency, the company announced quarterly earnings on Wednesday that disappointed investors.

GM reported its seventh consecutive quarterly profit this week, but executives from the company said they planned to institute aggressive plans to trim business costs. GM officials affirmed the long-term success of the firm is reliant on improving efficiency and keeping down costs, which have ballooned.

The soaring prices of many raw materials have begun to eat into GM's earnings, analysts said. This prompted company officials to address the effects of the precipitous rise in commodities, driven upward by burgeoning worldwide demand and rapidly eroding stockpiles.

The New York Times reports GM is still 26 percent owned by the federal government, having been bailed out by taxpayers in 2009. Through the first nine months of this year, GM has earned $7.1 billion, but anxious investors are calling on company executives to further buttress earnings by achieving business cost reductions.

"GM delivered a solid quarter thanks to our leadership positions in North America and China, where we have grown both sales and market share this year," GM chairman and chief executive Dan Akerson said in a statement. "But solid isn’t good enough, even in a tough global economy. Our overall results underscore the work we have to do to leverage our scale and further improve our margins everywhere we do business."

During its latest fiscal quarter, GM said its net revenue increased $2.6 billion from the same period in 2010, hitting $36.7 billion. However, the company's diluted earnings per share was $1.03, a drop from the $1.20 GM reported the year prior.

Shocks to the global automobile supply chain affected GM, but company officials said they were on course to deliver on plans to increase profitability.

"GM continues to execute the plan we outlined for investors in 2010," affirmed Dan Ammann, the firm's chief financial officer. "That includes investing in our products, further strengthening our balance sheet, generating cash and profits each quarter, and maintaining our low break-even level. The next level of performance will come as we systematically eliminate complexity and cost throughout the organization."

 

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