GM Scales Back Output in Brazil - Analyst Blog

By Zacks Equity Research,

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General Motors Company ( GM ) has closed down a shift at its Brazilian facility in Sao Jose dos Campos that manufactures Corsa, Zafira and Meriva models in an attempt to scale back its production in the country. The automaker aims to clear its inventories in the country's dealerships, which is near the highest since 2008.

The company has also offered a buyout plan at the facility, which has already been accepted by 50 workers. However, the labor union is trying very hard to avoid layoffs by the company.

Brazil's auto market has weakened owing to huge household debts and sluggish investment in roads leading to traffic gridlocks. Auto sales dipped 5% in May on a year-over-year basis while average daily volume was 12,500 in the month, which was below 13,000 this year. This can affect major key automakers in the country including Fiat SpA ( FIATY ), Ford Motor Co. ( F ) and Volkswagen AG ( VLKAY ) apart from GM.

Many local automakers have started idling production and downsizing workforce due to waning exports. However, car dealers in the country expect a boost in sales in June driven by tax incentives, trade protection for local auto plants and lower interest rates offered by the government.

GM, a Zacks #3 Rank (Hold) company, reported a $100 million fall in profits to $1.6 billion in the first quarter of 2012 from $1.7 billion in the same quarter of 2011, before special items, due to lower profits from its European operations.

On a per-share basis, adjusted profits were 93 cents during the quarter, down 2 cents from the first quarter of 2011. However, it exceeded the Zacks Consensus Estimate of 84 cents. Adjusted earnings before interest and taxes dipped to $2.2 billion in the quarter from $2.0 billion in the year-ago quarter.

Revenues in the quarter went up 4% to $37.8 billion on a 3% rise in unit sales to 2.3 million vehicles globally. It was higher than the Zacks Consensus Estimate of $36.4 billion. The automaker occupied a worldwide market share of 11.3% during the quarter, compared with 11.4% a year-ago.

FORD MOTOR CO (F): Free Stock Analysis Report
FIAT SPA (FIATY): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
(VLKAY): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: F , FIATY , GM , VLKAY

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