General Motors Co.’s first quarter profit tripled due to stronger vehicle and asset sales, but its chief executive warned that further cost cutting would be required ahead as earnings disappointed investors.
GM shares were off 2.3% to $32.26 in mid-day New York Stock Exchange trading as investors felt the high sales incentives applied to sell vehicles curbed North American profits and international profits fell from a year ago.
“We are making steady progress, but there is more work to do,” Chairman and Chief Executive Daniel Akerson said on a conference call Thursday. Mr. Akerson said “intensive cost cutting” is essential to ensure future profitability, even after the auto maker shed billions in debt and overhead in the last few years. It plans to pare inventive spending for the rest of the year after reducing spending on buyer discount from January and February.
The auto maker expressed optimism about the rest of 2011, saying it expects a rise in operating profit for the full year. It didn’t provide a precise estimate, however. A gain would build on the $4.7 billion that GM made in 2010, its most profitable year since 1999.
GM finance chief Daniel Ammann said GM’s profit forecast factors in high fuel prices, now at more than $4 a gallon in most of the United States. High gas prices tend to drive down sales of high-margin pickup trucks and sport-utility vehicles.
Even though consumers are downsizing, he said, many are opting for smaller SUVs, rather than cars, and those who are switching to cars are paying more for them. “It isn’t all about people moving from large SUVs into cars,” Mr. Ammann said.
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