GM's China sales up 10% in Q1

Despite record sales of vehicles in China, General Motors Co has posted a 14 percent drop in first-quarter profits, faced with one-off costs and weaker earnings in its core North American market.

Chairman and CEO Daniel Akerson told analysts on a conference call after Thursday's earnings release that the Detroit-based GM, which had 15.2 percent of the Chinese market during the January-March quarter, expects to invest at least $11 billion in China between 2013 and 2016, adding four assembly plants and raising capacity by 30 percent to 5 million vehicles.

It will boost capacity in the country 20 percent this year from a year ago, Akerson added.

Car industry analysts said the results again show how GM, the leading foreign automaker in China, has benefited from its investment in what has now become the world's biggest car market.

"Other Detroit manufacturers are behind the curve in the Chinese market," said Jeremy Anwyl, vice-chairman of auto industry information website Edmunds.com.

"GM stepped up and committed to expanding in China, and it's really paid off for the past several years."

Illustrating the role of China in GM's growth, Brian Johnson, Barclays Capital head of equity research for global autos and auto parts, noted that the market accounted for about 40 cents of the 58 cents-a-share profit reported for the first quarter.

He also pointed out that margins in GM's Chinese joint ventures were 11.7 percent, up from 10.2 percent in last year's first quarter. Margins in North America were about 4 percent.

GM has 12 joint ventures and two wholly owned enterprises in China.

Net income for the latest quarter was $1.2 billion, or 58 cents a share, reflecting preferred dividends. A year ago, GM's profit was $1.3 billion, or 60 cents a share.

Excluding a special loss item that reduced net income by $200 million, the results beat the forecast of analysts surveyed by data provider FactSet of 54 cents. Revenue fell 2 percent to a better-than-expected $36.9 billion.

As sales of luxury sedan and sport-utility vehicles in wealthy Chinese coastal cities slow, foreign automakers are turning their attention to western China.

They hope high-volume sales of functional sedans to less-affluent buyers will offset an expected drop in margins.