(In paragraph nine, removes full dollar amount for net income before one-time charges. The per-share amount is correct, at $1.29.)
By Joseph White and Bernie Woodall
DETROIT (Reuters) - General Motors Co
Chief Financial Officer Chuck Stevens Thursday reaffirmed the company's forecast that operating profit for the full year would improve from last year's $9.3 billion.
He said the automaker still expects to maintain strong profitability in China, despite slower-than-expected vehicle sales and intensifying price competition in the world's largest vehicle market.
GM shares were up more than 6 percent in morning trading before the opening of the New York Stock Exchange.
The recent sharp slowdown in China's vehicle sales prompted some analysts to forecast that GM would have to back away from its forecast of holding profit margins in China at 9 to 10 percent of sales. GM said profit margins in China improved to 10.2 percent from 10 percent a year ago.
"There are lots of levers we can pull" to cut costs and maintain profit margins in China, Stevens said during a briefing with reporters.
GM has committed to spending $14 billion on new vehicles and facilities in China over the next several years. Spending on new models won't slow, Stevens said, but GM will "monitor and time and continue to evaluate" when to add new capacity in the Chinese market.
"Our long term view on China hasn't changed," Stevens said. Within the next 10 to 15 years, China's auto market will grow to 35 million vehicles a year, he said. Automakers sell about 20 million vehicles a year in China now.
Stripping out one-time charges, GM earned $1.29 a share in the latest quarter, up from 58 cents a share. The latest results were well ahead of the $1.08 a share forecast of analysts. Profits rose despite declining global vehicle deliveries and a 3.5 percent decline in worldwide revenue.
Net income rose to $1.1 billion, or 67 cents a share, from $200 million, or 11 cents a share, a year ago, when it was hurt by a big charge relating to recall costs.
GM exceeded one of the key financial targets it agreed to in March as part of an agreement with a shareholder group that had challenged the company for hoarding cash.
Stevens said that in the past 12 months, GM's return on investment capital was 23.4 percent, ahead of the 20 percent goal agreed to with the investor group. Addressing another aspect of that agreement, GM said it has repurchased $2.1 billion of its shares for the year through July 21.
GM's North American operations were the main engine of growth for the company, as profits in the region doubled to $2.8 billion and profit margins of 10.5 percent, nearly doubled year- ago levels.
GM's North American results were hit by a $75 million charge for a compensation fund for victims in its recall of millions of vehicles with defective ignition switches. That brought the cost of the compensation fund to $625 million, a figure that Stevens said would not significantly rise.
(Editing by Bernadette Baum)
