GM Posts $125 Million Profit in Spite of Recall Costs

Despite taking a hit of $1.3 billion to cover recall-related costs, General Motors has managed to post a modest $125 million profit in the first quarter.

While profit dropped 85.5 percent this quarter compared with the same period the previous year, earnings per GM share came to 6 cents, topping earlier estimates from analysts, The Detroit News reported.

The damaging recall costs comprise $700 million to cover ignition switch and ignition lock cylinder replacements in 2.59 million vehicles, including $300 million for shipping costs, as well as $1.1 billion in restructuring costs. The price covers $600 million for recalls of another 4.5 million vehicles as well. Losses from the recall hurt earnings by 48 cents a share altogether.

In spite of the heavy loss, GM eked out a $125 million profit and has now been profitable for 17 quarters in a row.

"Clearly, the headline results are overshadowed by the recall campaign charges of $1.3 billion, but when you look underneath that, we had strong performance across the board," GM Chief Financial Officer Chuck Stevens told reporters Thursday at GM's headquarters in Detroit, as quoted by The Detroit News.

It's too early to predict whether or not GM will need to spend more on additional recall costs, Stevens said.

"It's an understatement to say the first quarter was a challenge for General Motors," added CEO Mary Barra, who rose in the ranks to head GM earlier this year, as quoted by The Detroit News.

So far, GM has provided more than 36,000 loaner and rental cars to owners who have been affected by the recall, Barra said.

The $1.3 billion will go to cover costs for the recent 2.6 million-vehicle recall related to ignition switch failures in Chevrolet Cobalts and other small cars.

Delphi Corp., which is making the necessary ignition switches, has a line running seven days a week to manufacture the parts, and two more lines should be added this summer. GM has estimated that all the cars should be repaired by October.