General Motors Co. (GM) announced that it will invest $88 million to build a new model at its Cadillac plant in Lansing, Michigan. However, the investment would not create any jobs at the plant. The investment would be used for equipment and tooling of the new model.
The Lansing Grand River plant presently employs 917 hourly and salaried employees. It manufactures three models of the mid-size Cadillac CTS car – sedan, coupe and wagon, along with a high-powered V-series version of each model.
So far this year, Cadillac has achieved the highest market share than any other brand in the U.S. luxury car market. During the first four months of the year, the vehicle’s sales went up 32% and its market share rose about 2 percentage points from the year-ago levels.
GM’s investment in Lansing plant is a part of its $2 billion investment plan at 17 assembly and components plants in 8 states in the U.S. Through the $2 billion investment plan, the company aims at creating or preserving more than 4,000 hourly and salaried jobs at the plants.
Last month, GM announced to invest $109 million in its Flint and Bay City operations in Michigan as a part of the same plan. The investment at the plants will support production of 1.4L Ecotec Engine that will be used in fuel-efficient vehicles such as the Chevrolet Cruze, Volt plug-in hybrid and the Sonic.
GM, a Zacks #3 Rank (Hold) stock, earned a profit of $3.2 billion or $1.77 per share in the first quarter of 2011 that increased more than threefold from $865 million or 55 cents per share a year ago. However, more than half of the profits have been contributed by one-time gain from sales of the company’s ownership interest in Delphi Automotive LLP ($1.6 billion) and Ally Financial Inc. ($300 million).
Excluding these gains and a $0.4 billion goodwill impairment charge at GM Europe (GME) resulting from a change in accounting standards and charges of $0.1 billion at GM International Operations (GMIO) related to revised tax regulations affecting the company’s India joint venture, GM’s profit stood at $1.7 billion or 95 cents per share, topping the Zacks Consensus Estimate by a penny. It was also GM's biggest profit in 11 years since earning $1.8 billion in the second quarter of 2000.
Revenues during the quarter went up 15% to $36.2 billion on sales of 2.2 million vehicles globally, up 11% from the prior year. It exceeded the Zacks Consensus Estimate of $35.2 billion.
Strong demand for its fuel-efficient lineups including Chevrolet Cruze compact and Equinox crossover helped boost the company’s sales. The automaker occupied a market share of 11.5% during the quarter, up from 11.1% in the year-ago quarter.
However, GM is still lagging behind its hometown rival, Ford Motor Co. (F), in spite of selling more vehicle units. Ford posted a 48% rise in profit to $2.61 billion in the first quarter of 2011 from $1.76 billion in the same quarter of 2010. On earnings per share basis, profits rose 35% to 62 cents from 46 cents a year ago, thereby topping the Zacks Consensus Estimate by 12 cents.
The company’s revenues escalated 18% to $33.1 billion, surpassing the Zacks Consensus Estimate of $30.5 billion. The increase in revenues was backed by a 12% rise in sales to 1.40 million vehicles.
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