General Motors has boosted second quarter 2007 net income $US4.3bn to $891mn and posted record automotive revenue of $45.9 bn, the automaker announced on Tuesday.
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“We again saw improved results in sales, income and cash flow this quarter, driven by the continued successful implementation of our business strategies,” said chairman and chief executive officer Rick Wagoner.
“In particular, our heavy commitment to key growth markets around the world really paid off in strong growth and earnings.”
GM said its second quarter was marked by record automotive revenue driven by strong sales in key growth markets, improved net income, and solid operating cash flow.
On struggling North America: “We continue to make progress with our focus on great new products, a disciplined sales and marketing strategy, and structural cost reduction, although profitability remains close to break-even.”
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By GlobalDataQ2 results included $520m, or $.92 per share, of special items including $374m in charges associated with support for the bankruptcy and reorganisation of Delphi and various GM North America (GMNA) restructuring charges.
GM posted adjusted net income, excluding special items, of $1.4bn, or $2.48 per share, compared to $1.1bn, or $2.03 share, a year ago.
Automotive operations
Net income from continuing operations was $764m on an adjusted basis (reported net income $618m), compared to an adjusted net income of $367m (reported $3.48bn) in Q2 2006.
Global sales volume passed 2.4m units, up only marginally. Global market share was down slightly at 13.3%, compared to 13.7%, driven by a softer US market, a reduction in fleet sales, and “a disciplined incentive strategy” [aka discounts].
Market share outside North America increased only fractionally to 9.4% vs 9.2%.
GM North Amercia posted adjusted net income from continuing operations of $78m (reported net loss of $39m), compared to an adjusted net loss of $94m (reported net loss of $3.95bn).
GM said the improvements reflect favourable model mix and reduced structural costs partially offset by lower volume, favourable policy and warranty (P&W) adjustments a year ago and unfavourable foreign exchange.
“It’s true that our North America team has made huge improvements, and we appreciate everyone’s hard work. But our current earnings clearly demonstrate we’ve got more to do,” Wagoner said.
Obviously mindful of current contract renewal negotiations with the key United Auto Workers union on the topic, he added: “We must continue to address our key areas of cost disadvantage such as healthcare.
“Going forward, we need to generate adequate profitability and cash flow to fund new product and key technology investments, like bio-fuel and hybrid-powered vehicles, to better position our business for sustainable growth.
“As we head into the second half of the year, we’re optimistic about continued growth prospects in key emerging markets. In the US, the economy and auto market outlook remains challenging, but we’ll continue our future product and technology investments, while staying focused on growing our revenue and improving our cost competitiveness,” Wagoner said.
“We look forward to the UAW negotiations as an opportunity to continue to address issues that are important to the company, the union and our employees.”
GM Europe (GME) boosted adjusted net income to $236m for the quarter (reported net income of $217m), compared to $143m and a reported net loss of $39m last year.
The results mark the best quarterly performance for GME since the second quarter of 1996 and were helped by favourable pricing and cost-reducing restructuring.
GME set a quarterly sales record of 574,000 units, up 5%, and growth in key Eastern European markets was strong, especially Russia, where unit sales were up 106%.
GM Asia Pacific (GMAP) posted adjusted net income of $237m in the second quarter compared with $164m. The improvements were largely driven by strong performance at GM Daewoo and GM China, where a new volume record of 234,000 units was reached in the quarter, up over 6% year-over-year. GM sales in South Korea – source of most Chevrolet models sold outside North America – were up 20% and India rose 46% helped by the new Chevrolet (Daewoo) Spark small car.
GM Latin America, Africa and Middle East (GMLAAM) posted its best quarterly net income in a decade with adjusted earnings of $213m compared to $155m, helped primarily by volume growth and favourable pricing. GMLAAM also set a volume record for the quarter, selling over 293,000 units, up 20% year-over-year.
GM recently announced major new investments in R&D in Latin America, primarily for Brazil.
GMAC
Now a stand-alone company, GMAC Financial Services reported net income of $293m for the second quarter 2007, compared to $787m in the second quarter 2006 which included a one-time gain on the sale of a regional homebuilder of $259m.
“Financial performance at GMAC represents a $598m improvement over the first quarter 2007,” GM said, adding it had been “significantly affected” by the current US nonprime mortgage default crisis.
GM noted that the sale of the Allison Transmission business would bolster liquidity, with proceeds of approximately $5.6bn – the deal should close this quarter.
