Arlington-made SUVs fuel profit surge at General Motors

Encouraged by lower gas prices, consumers in the U.S. spent big in the first quarter on vehicles that carry lots of passengers and cargo — and deliver hefty profit margins for General Motors.

The shift to pickups and SUVs, including models made in Arlington, helped GM record a $2.18 billion first-quarter profit in North America, its most lucrative market. Tougher conditions in Europe, particularly Russia, and South America whittled GM’s overall quarterly net profit down to $945 million.

Late last decade, big SUVs such as the Chevrolet Tahoe fell out of favor as consumers consistently saw prices above $3 at the gas pump and the U.S. economy struggled. But the economy is now growing, if somewhat unevenly, and gas has averaged about $2.30 per gallon so far this year. As a result, consumers bought nearly 55,000 big SUVs from GM, the best January-through-March total in seven years.

Pickup sales also rose as conditions improved for small businesses. GM sold more than 198,000 in the U.S., the best first quarter for the vehicles in eight years, according to Ward’s Automotive.

Those big vehicles bring in sizeable profits. For the quarter, the average price of a Tahoe rose 8 percent to more than $57,000, Kelley Blue Book said. Analysts estimate that GM makes around $10,000 apiece on trucks such as the Chevrolet Silverado and Cadillac Escalade.

“With gas prices still near a seven-year low point, and with credit more affordable and available than ever, GM, like the rest of the industry, has seen a significant increase in sales of their most profitable vehicles,” said Kelley Blue Book Senior Analyst Alec Gutierrez.

Chief Financial Officer Chuck Stevens said consumers’ decision to buy big was “clearly a favorable tail wind” that boosted GM’s bottom line by $500 million.

In Arlington, GM is considering another expansion to its assembly plant, which employs about 3,500. Earlier this month, Arlington Mayor Robert Cluck confirmed that the automaker is weighing a $1.2 billion expansion which would add 1.2 million square feet to the plant’s footprint over three years and 589 more jobs.

Just last fall, GM opened a stamping facility as part of a $530 million expansion and overhaul of the 60-year-old complex to prepare for manufacturing the new SUV models. That followed a $331 million body shop expansion and retooling.

GM’s profit amounted to 56 cents per share, compared with only $125 million, or 6 cents per share a year ago. The company did take an after-tax charge of $100 million this year to add to its compensation fund for victims of crashes caused by the faulty switches. Without those items, GM would have made 86 cents per share, short of analysts’ estimates of 95 cents.

GM shares lost $1.24 to close at $35.92.

This story was originally published April 23, 2015 at 9:57 AM with the headline "Arlington-made SUVs fuel profit surge at General Motors."