DETROIT _ General Motors earned a profit of $2.8 billion in the third quarter, exceeding Wall Street estimates and doubling its year-earlier haul, yet the automaker still saw its shares sink Tuesday as investors remain convinced that new vehicle sales in North America have nowhere to go but down.
On a per-share basis, GM earned $1.72, easily beating the $1.44 per-share average estimate of 16 analysts and producing the company's best third-quarter profit since emerging from its 2009 bankruptcy restructuring.
Yet GM shares fell 4.2 percent, or $1.38, to a close of $31.60. That's despite the company buying back $5 billion of its own shares, a move companies use to boost their stock when investors see it as undervalued.
Investors remain concerned that automakers will not be able to rein in production as sales decline, which would lead to bloated inventories and, in turn, large rebates and special financing offers.
Chuck Stevens, GM's chief financial officer, acknowledged that incentive spending is increasing throughout the industry but said GM isn't spending as much in the area as its competitors. He said GM is continuing to see higher transaction prices in its most profitable segments: mid-size and full-size pickup trucks.
"We're confident that under a plateaued industry environment we can sustain a solid profit margin," Stevens said during a conference call with analysts.
Fiat Chrysler spent an average of about $7,100 in incentives for each of its Ram pickup trucks sold in September, according to J.D. Power data obtained by the Detroit Free Press.
While GM may be resisting the temptation to match those rebates, inventories of the Chevrolet Silverado and GMC Sierra are larger than what's considered optimal.
Still, GM's global profit for the July-through-September period was more than double what it made a year earlier.
"Our record third quarter, led by strong performance in the U.S. and China, reflects our determination to deliver earnings that enhance shareholder returns," said CEO Mary Barra.
GM has focused, especially in the U.S., on retail sales, those made to individual consumers, while reducing less profitable sales to daily rental fleets. Barra and her team have chosen to be a smaller but more profitable player in the U.S. market.
