General Motors said it may resume paying dividends next year after a recovery in the global car market drove its third-quarter profits higher.

The Detroit automaker’s net income surged 74 per cent to $4bn from the same period a year ago, even as revenue stayed flat at just under $36bn. Adjusted earnings per share climbed 65 per cent to $2.83, surpassing the $1.83 a share forecast by the 12 analysts polled by FactSet.

Chief executive Mary Barra said the quarter’s performance was driven by the industry’s recovery in the US and China, as well as strong average transaction prices, especially for pick-ups.

“If our current recovery continues, we anticipate reinstating a
dividend at the appropriate level, that balances various capital
allocation priorities,” Ms Barra said. “We know this is a priority for
investors,” she added.

GM, Ford and Fiat Chrysler all shut down factories in the spring as the first wave of Covid-19 infections swept through the US. The production halt tightened the supply of vehicles, and since the plants reopened, the Big Three automakers have scrambled to meet demand.

Some of the higher pricing is a sign that GM’s push to reach a broader market, including buyers of luxury trucks, is paying off, Ms Barra said. The group reported a 14.9 per cent profit margin in the quarter, up from 8.4 per cent in the third quarter of 2019.

At the same time cost savings came from GM’s efforts to transform the business as well “austerity measures” the company took during the pandemic, Ms Barra said.

Although the drawn out period to determine the US election result had been anticipated, as far as the outlook for car demand goes, “we need to look as it related to Covid, with a new record being set in the US”, Ms Barra said. The company also needs to assess the effect of a possible second round of government stimulus on consumer demand.

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“There’s a lot of moving pieces right now,” she said, adding that GM’s fourth-quarter results are traditionally weaker than the third quarter.

The group’s acting chief financial officer, John Stapleton, forecast between
$8.5bn and $9bn in earnings before interest and taxes for the second
half of 2020, an improvement over the $4bn to $5bn predicted in July.

Ms Barra said that GM remained in “ongoing discussions” with Nikola, the electric vehicle truckmaker it agreed to take an 11 per cent stake in September. Nikola’s stock has since plunged after a short seller alleged that founder Trevor Milton misled investors over the group’s technology.

Mr Milton has denied any deception, and the company offered a
rebuttal that conceded some points in the report. Mr Milton left the
company in September.

Late last month, GM President Mark Reuss said the carmaker was “going forward” with a deal to take the stake in exchange for making Nikola’s Badger truck and selling its battery and hydrogen fuel cell technologies to the company.

Ms Barra told reporters on Thursday that “we are exploring all opportunities to commercialise our Ultium battery system as well as our Hydrotec hydrogen fuel cells”.

The deadline for GM to ink a deal with Nikola is December 3.

Via Financial Times