General Motors Co. (GM) announced that it would invest $109 million in its Flint and Bay City operations in Michigan in order to 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. Chevrolet Sonic will be built at GM's assembly plant in Orion Township, Michigan later this year.
The investment will retain 96 jobs at the plants. It is a part of GM’s $2 billion investment plan at 17 assembly and components plants in eight states of U.S. The plan aims at creating or preserving more than 4,000 hourly and salaried jobs at the plants. (See our blog GM to Invest in 17 U.S. Plants)
Of the $109 million, GM will invest $84 million at Flint to increase production capacity for 1.4-liter engines. The remaining $25 million will be invested in Bay City for the production of connecting rods and camshafts used in the engine.
In November last year, GM invested $163.2 million at the Fling, Bay City and Defiance, Ohio plants to support the production of same engines for the Chevrolet Volt, Chevrolet Cruze and a new Chevrolet small car. It saved 184 jobs at the three facilities.
GM revealed that its North American plants are already running at nearly full capacity. At the beginning of the year, the automaker announced its plan to invest $30 million in its stamping plant in Pontiac, Michigan in order to improvise on tooling and equipment that will, in turn, enhance the plant’s manufacturing capabilities.
It also plans to invest $100 million in its 72-year old Rochester plant in New York that was almost on the verge of closing. The company decided to continue running the plant as the workers agreed to “second-tier” wage levels.
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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