General Motors on Monday reported what it called “significantly improved” 2006 second quarter results despite the fact that its net loss soared to $US3.2bn, or $5.62 per share compared with $987m, or $1.75 per share, a year ago.
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The Q2 net loss included $4.3bn, $7.66 a share, in special items that included the previously announced $3.7bn after-tax charge for axing 34,400 hourly employees.
Excluding the special items, GM said its global automotive operations were profitable for the first time since 2004, and noted that it had posted a second consecutive quarter of record revenue.
Other special items included a loss on the pending sale of 51% of GMAC, a gain on the disposition of Isuzu stock, and restructuring charges.
Q2 adjusted net income, excluding special items, was $1.2bn, or $2.03 per share, on record revenue of $54.4bn, a $1.4bn improvement from the year-ago adjusted loss of $231m, or $0.41 per share, on revenue of $48.5bn.
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By GlobalData“It’s rewarding to see our automotive business return to profitability on an operating basis and a clear sign that we’re on the right track, but there is more work to be done.” said GM chairman and chief executive officer Rick Wagoner in a statement.
Wagoner added that the success of the accelerated job-cutting programme in the United States, along with other cost cuts, led the automaker to increase its structural cost reduction target in North America to $9bn from $8bn on average by the end of 2006.
“Our turnaround has not just gained traction, it’s accelerating into high gear,” Wagoner said. “While significant work still remains, our ability to identify and initiate $9bn in cost cuts over the course of the past year is unprecedented in this industry.
“We’re particularly pleased with the speed with which our people have implemented our turnaround plan. Conventional wisdom is that you can’t turn a ship as big as GM around quickly. We aim to prove that conventional wisdom wrong.”
GM’s global automotive operations earned $362m, excluding special items, an improvement of $1.3bn year-on year. This was due primarily to significant improvement in North America and continued profitability improvement in other regions.
Global market share in the second quarter was 13.8%, up from the first quarter market share of 13.1%, but down from 15.1% last year. The change was largely attributable to last year’s successful employee discount incentive program in North America and lower fleet sales in Europe.
GM North America posted an adjusted net loss of $85m, a $1.1bn improvement year on year helped by cost reductions in warranty and pension expenses, due largely to the success of the job-cut programme.
GM Europe posted adjusted earnings of $124m for the quarter, up $94m compared with Q2 2005, due to improved material costs and pricing.
GM Asia Pacific posted adjusted earnings of $167m, down on last year’s $183m. This was due to the loss of income from Suzuki following the reduction in GM’s stake.
GM Latin America, Africa and Middle East posted adjusted earnings of $156m, a significant increase of $131m, reflecting increased volume and improved pricing.
General Motors Acceptance Corporation (GMAC) reported record net income of $898m, up $82m year on year. The automotive finance and insurance businesses reported lower earnings, however.
Automotive finance operations reported earnings of $251m, down $115m from $366m a year ago, due to a combination of continued margin pressures, lower remarketing results in the US and Canada and higher consumer credit provisions.
