General Motors Corp.’s profit more than doubled to $1.3 billion in the second quarter with earnings per share up to $2.43 compared to $477 million or $1.03 per share a year ago (including the impact of a Hughes loss – the unit is being sold – and a $55 million end-of-life recycling charge for Europe).
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GM cited higher North American production and the benefits of cost-cutting efforts as major factors behind the improvement.
GM reported its global automotive operations earned $1.1 billion during the second quarter, compared with $410 million during the April-June period a year ago. Global production increased nearly 7 percent in the second quarter, compared with the same period in 2001. Strong performance in North America was partially offset by losses in Europe and Latin America.
Income for its North American operations more than doubled to over $1.2 billion from $521 million in the second quarter last year. Production volume increased by almost 14 percent.
GM said its overall US market share increased to 28.1 percent in the second quarter of 2002, driven by gains in both passenger cars and trucks. That compares with 27.3 percent in the year-ago period. Trucks as a percentage of total sales increased to 54 percent in the second quarter, up from 52.2 percent in the same period last year.
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By GlobalData
“The second-quarter results show that our strategy of bringing out great products, being aggressive in the marketplace, and intensely focusing on reducing costs and improving quality is working,” said GM President and Chief Executive Officer Rick Wagoner. “Because of our improved cost base, we are able to be competitive with our pricing and improve our financial performance at the same time”.
Wagoner attributed the market share gains to the successful introduction of new products such as the Cadillac CTS, Chevrolet TrailBlazer, GMC Envoy, Saturn VUE, and the Pontiac Vibe, as well as continued strong performance of GM’s full-sized trucks and sport utility vehicles.
“We continue to introduce a steady stream of new products, which are key to our success in the marketplace,” Wagoner said. “Right now, extended versions of our popular Chevy TrailBlazer and GMC Envoy are on their way to dealers, along with the all-new HUMMER H2.”
GM Europe (GME) reported a loss in the second quarter of $115 million along with a 7 percent decline in production. That compares with a $154 million loss in the same period last year and GM pointed to the impact of cost reductions on limiting the scale of the loss.
“GM Europe’s restructuring plan, Project Olympia, is showing results although the European market continues to weaken,” Wagoner said. “We are moving aggressively to cut costs and better manage capacity utilization. Our joint ventures with Fiat Auto have produced meaningful savings, especially in material costs.”
GM Asia-Pacific reported a profit of $39 million in the second quarter of 2002 compared with a profit of $12 million a year ago, led by a strong performance from Shanghai GM.
GM Latin America/Africa/Mid-East (GMLAAM) reported a loss of $73 million in the second quarter of 2002 compared with a profit of $31 million a year ago. Results were negatively affected by unfavorable economic conditions in Brazil, Venezuela and Argentina.
Looking ahead, General Motors expects total US industry vehicle sales for 2002 will be in the mid-to-high 16-million unit range. For 2003, GM expects total U.S. industry sales about the same as 2002, in line with trend volume. GM’s forecast for North American production remains unchanged at about 1,245,000 vehicles in the third quarter of 2002 and more than 5.5 million vehicles in calendar year 2002.
For the third quarter of 2002, GM estimates its earnings, excluding Hughes and any special items, will be approximately $0.90 per share, reflecting solid results in North America, partially offset by continued losses in Europe and Latin America.
Analysts say that the general erosion of margins in the US marketplace and the stiff competition provided by import marques is bad news for the Detroit Big Three. If the overall market is adversely affected by broader macroeconomic trends and worsening consumer confidence, the second half of the year could see a marked deterioration in financial results.
There are also concerns about the costs, following acquisition, of absorbing and integrating Daewoo Motor’s operations into GM’s organisation. Pension fund costs have also emerged as an issue following recent stock market losses.
GM’s share price remains in the doldrums in spite of the improved profitability inherent in the Q2 results.
