Recall costs and provision for possible future liability clobbered GMs Q2 results

Recall costs and provision for possible future liability clobbered GM's Q2 results

General Motors’ European operations are moving slowly in right direction towards a target of hitting profit by mid-decade reporting a second quarter EBIT-adjusted loss of US$300m, which included US$200m for restructuring costs.

Ford today said its European operations had booked a pre-tax operating profit for the first quarter in three years.

GM's Europe loss compared with $100m of EBIT-adjusted in the second quarter of 2013 but recall issues in North America cost the company dear in the last quarter, all but wiping out profits.

The carmaker took a $900m charge in the quarter to cover the cost of potential recalls over the next 10 years on top of the US$400m it had put aside to pay compensation to victims of the recall that first emerged in February.

Chief executive Mary Barra is overhauling GM's recall policy after the company apparently failed for more than a decade to report an ignition switch problem with vehicles that has been tied to a number of deaths.

GM's quarterly profits fell to $200m from US$1.2bn a year ago. Despite the recall issues, the strength of the US vehicle market provided some consolation. Revenues in the quarter rose to $39.6bn from $39.1bn a year ago.

Barra said in a statement: "Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid vehicle launches."