* Q1 EPS ex-items 95 cents vs Street view 91 cents
* Analysts cite paltry pricing gains
* GM shares fall as much as 4.7 pct
* N. American truck output could fall as gas prices rise
(Adds background on trading volume, updates share price)
By Ben Klayman and Bernie Woodall
DETROIT, May 5 A tripling of profits by General
Motors Co (GM.N) was marred by incentives to lift car sales,
raising doubts about the automaker's ability to maintain
momentum since emerging from bankruptcy.
GM's first-quarter profit topped expectations on Thursday,
driven by a recovery in the U.S. market on the back of strong
demand for more fuel-efficient cars like the Chevrolet Cruze.
Analysts, however, raised concerns that GM was not able to
match rival Ford Motor Co's (F.N) ability to boost both volumes
and prices, and GM's shares fell as much as 4.7 percent.
Even though the U.S. automaker's sales rose 15 percent to
$36.2 billion against Wall Street's estimate for $35.6 billion,
analysts said the increase was tarnished by the aggressive
incentives early in the quarter.
"It's great that they beat consensus," Morningstar analyst
David Whiston said, "but it's troubling to see them not get any
help ... from pricing. That's quite a contrast from Ford, which
is getting improvements from both volume and pricing. GM's only
getting help from volume right now."
It was the first full quarter since GM's initial public
stock offering last November. The company filed for bankruptcy
in 2009 after the U.S. housing downturn and a spike in gasoline
prices the year before that caused consumers to turn away from
its high-profit trucks.
GM emerged from bankruptcy 40 days later thanks to a $52
billion taxpayer-funded bailout and the U.S. government still
owns 32 percent of common shares.
GM earnings graphic: r.reuters.com/myf49r
Breakingviews column: [ID:nN05286185]
Pricing for GM's cars and trucks fell in North America and
stayed flat in its Europe and international operations, which
mostly consist of GM's largest auto sales market, China.
Pricing rose in South America.
The adjusted operating profit in GM's international
operations fell by one-third from the year earlier.
Chief Financial Officer Dan Ammann said that GM recently
announced a price increase on most of its vehicle lineup that
went into effect earlier this week. Continued price increases
may come as the year goes on.
"From our point of view, it's a solid quarter. It's good
progress. It sets up a good foundation for the balance of the
year," Ammann said.
But GM's gains from vehicle pricing were weaker than those
of Ford, analysts said.
"Worth noting that GM's pricing did not surprise on the
upside as Ford's did," J.P. Morgan analyst Himanshu Patel said
in a research note, referring to the first quarter. "GM's March
to April incentive decline was not as steep as Ford's,
suggesting Ford benefited more than GM."
GM's first-quarter operating margin in North America was
just under 6 percent, compared with 10.3 percent at Ford.
GM shares were down 2.2 percent at $32.32 on Thursday
afternoon after dropping as low as $31.50. GM shares debuted
last fall at $33. Ford shares were up 0.7 percent at $15.25.
Analysts have said many investors are standing on the
sidelines, waiting for the U.S. government to divest its stake
in GM. This may be reflected in GM's stock, which has an
average daily trading volume about one-fifth of Ford's.
GM said it expects full-year adjusted earnings before
interest and taxes to show "solid improvement" from 2010 helped
by better pricing and lower fixed costs in North America.
GM's results followed those of Ford, which last week posted
its best first-quarter profit in 13 years as higher prices for
redesigned vehicles offset pressure from spiking commodity and
oil prices. [ID:nN26265189]
Strong profits at Ford and GM in the past year are expected
to be a major factor in upcoming negotiations with the United
Auto Workers union. Both companies are in much better financial
position than the last time talks were held in 2007.
However, GM Chief Executive Daniel Akerson said the UAW
understands GM's cost structure needs to remain on par with its
rivals, including Japanese automakers with U.S. plants and said
the earnings impact of the talks would be "at the worst, a
COMMODITY COSTS RISING
GM will have an "intense focus" on holding costs in check,
Akerson told analysts on a conference call.
"We are currently faced with increasing commodity costs,
which we need to offset through cost reduction in other areas,
supplier performance and increased prices," he said.
However, GM was heavily criticized by Wall Street for its
lofty U.S. incentives in January and February that were then
dialed back in subsequent months.
Ammann said GM's U.S. incentives are currently running
slightly below the industry average and that they will remain
there for the remainder of 2011.
In addition to strength in China, GM's sales in its home
North American market are growing. GM's April U.S. sales rose
26 percent and it retook the top spot it lost to Ford the prior
GM's net income in the first quarter rose to $3.2 billion,
or $1.77 a share, compared with $900 million, or 55 cents a
share, in the year-earlier quarter.
Excluding such one-time items as sales of stakes in parts
maker Delphi and Ally Financial, it earned 95 cents a share.
That was 4 cents better than what analysts polled by Thomson
Reuters I/B/E/S had expected.
Ammann said GM is set up well to profit from higher
gasoline prices with a much more diversified portfolio than
three years ago when gas prices last topped $4 per gallon.
TRUCK PRODUCTION MAY FALL
However, Amman said GM could cut truck production if the
recent shift toward smaller, more fuel-efficient cars
continues. This is a concern of analysts because trucks and big
SUVs are more profitable for automakers.
GM's North American operations posted adjusted earnings in
the quarter before interest and taxes of $1.3 billion, up $100
million from last year. It expects North American results to
improve on average for the rest of the year.
GM's European unit broke even on an adjusted earnings
before interest and taxes basis and is targeting break-even
before restructuring charges for the entire year.
The automaker's liquidity at the end of the quarter rose to
$36.5 billion after the sales of the Delphi and Ally stakes.
Ammann said GM has attained its goal of a "fortress balance
sheet at this point in time" and the company was pleased with
its debt position of $5 billion, unchanged from last quarter.
(Additional reporting by Deepa Seetharaman and Nick Carey in
Detroit; Editing by Derek Caney, Dave Zimmerman and Matthew