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Fatter margins earn GM a $2bn profit

aus bus pix GM CEO General Motors' chief executive Dan Akerson Source: AP

GENERAL Motors earned $2bn in the third quarter - its third-straight quarterly profit - as consumers paid more for its vehicles.

The results, posted as GM pitches itself to investors ahead of next week's planned initial public offering of stock, compare with a $US1.2bn loss during last year’s shortened third quarter that followed the company's exit from bankruptcy reorganisation.

The auto maker reported earnings per share of $US1.20 in the most recent quarter, compared with a loss of US73c a share in the last year.

Chief executive Daniel Akerson said GM had slashed costs, improved its balance sheet and was generating cash.

However, Mr Akerson added that GM remained unprofitable in Europe and still needed to improve the way its vehicles are marketed in its core North American market.

"We know we still have much more work to do," he said.

The auto maker generated $US1.4bn in cash on its operations, and GM said it is on a path this year to produce its first annual profit since 2004.

GM earned $US865 million in the first quarter and $US1.2bn in the second.

In North America, GM had operating profit of $US2.1bn, boosted by higher sales of high-margin pick-up trucks.

The company's European operations posted a loss of $US559m, while its international operations — which include fast-growing markets such as China and India — earned $US646m.

GM's revenue totalled $US34.06bn in the latest quarter. Revenue was $US25.15bn in the shortened year-earlier quarter.

The company's US sales have improved and consumers are paying more for its cars and pick-up trucks.

Meanwhile, fast growth in China and other emerging markets contributed to the bottom line.

The earnings figures were in line with preliminary results GM announced last week.

The confidence of GM's new management team and its ability to earn money is a turnaround from the old GM, which often declined to offer clear forecasts.

GM's results indicate the company's North American unit earned an average of $US3005 on every vehicle it made in the third quarter, a reflection of its drive to boost pick-up truck output during the northern summer.

GM also is commanding higher prices for cars and smaller sport-utility vehicles.

By comparison, Ford earned $US2710 on each vehicle it produced in North America in the quarter, and Chrysler earned $US593 per vehicle.

But GM warned that it expects fourth-quarter operating profit to come in well below the level of the first three quarters of the year because it is pulling back on production of pick-up trucks and making more small cars, which have narrower margins.

GM increased pick-up truck production in part by cancelling its traditional two-week summer shutdown in July.

In the third quarter,pick-up trucks comprised 27 per cent of GM's production compared with 23 per cent in the second quarter, the company said.

Compact cars, meanwhile, comprised 1.2 per cent of GM's output, down from 6.4 per cent the previous quarter.

The trend toward buyers favouring pick-up trucks could be a troubling sign for auto makers as GM and its rivals prepare to launch a string of small cars - largely in response to stricter US fuel-economy standards, said Rebecca Lindland, an IHS Automotive analyst.

Ms Lindland said demand for pick-up trucks in October hit a two-year high on a seasonally adjusted basis.

For GM, the recent profitability has enabled the company to return $US9.5bn of the $US49.5bn bail out from the US government and begin to pay into its under-funded pension plan.

Mr Akerson said GM had a stronger position in the US market after trimming operations in bankruptcy court.

"We've sold more vehicles with four brands than we did last year with eight brands," he said.

GM has earned more than $US4bn so far in 2010, including the third quarter. It is a dramatic reversal after five straight years of annual losses.

GM, however, still falls short of Ford. GM earned $US4.1bn in the first nine months of 2010, while Ford earned $US6.4bn.