http://www.detnews.com/apps/pbcs.dll/article?AID=/20070731/UPDATE/707310405/1148/AUTO01General Motors earns $891 million in second quarter; says U.S. sales still soft
Sharon Terlep / The Detroit News
General Motors Corp. turned a profit for the third straight quarter, the company announced Tuesday, signaling some steady progress in its turnaround plan.
The automaker posted an $891 million profit for the second three months of the year, a marked improvement from a year ago when GM lost $3.4 billion in the same period.
Savings from last year's plant closings and job cuts along with a better-than-expected performance from its former financial arm helped GM turn a profit even with a reduction in overall revenue.
Tuesday's financial results were affected by certain special charges such as $375 million spent on the bailout of former subsidiary Delphi Corp. and $888 million in restructuring costs. But for those charges, GM said, its earnings would have been more than $1.4 billion.
Despite the gains, the automaker is still losing money on its critical North American operations, though not as much as a year ago. GM North America lost $39 million in the second quarter, compared to a $3.95 billion loss a year ago.
"In 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 breakeven," GM Chief Executive Officer Rick Wagoner said in a statement. "But our current earnings clearly demonstrate we've got more to do."
GM's overall revenue was $46.8 billion, down from $53.9 billion a year ago. Global sales volume was more than 2.4 million units in the quarter, the automaker said.
Through the first half of the year, GM has made $953 million. Last year, the automaker had lost $2.8 billion through June.
Outside North America, GM's market share increased to 9.4 percent, from 9.2 percent in the second quarter of 2006.
Slower-than-expected sales GM's new full-size pickup have hurt GM, which still relies heavily on sales of highly profitable trucks and SUV. A slowdown in the housing market and rising fuel prices are keeping keep buyers away, and competitors foreign and domestic have piled on incentives to move their trucks.
The setback with trucks has been offset in part by GM's strategies to pare back incentive spending and low-profit sales to fleet companies. By commanding more for each car and truck it sells, GM is able to pair losses amid falling sales.
Even with the progress, GM and Wall Street continued to emphasize the importance of reaching a favorable deal with the United Autoworkers Union this summer. GM, like Ford Motor Co. and the Chrysler Group, is looking to get a four-year contract with the union that will significantly reduce health care and labor costs at its North American plants.
"Everything looks very good -- North America was probably a little bit shy of where we had hoped, but the rest of the world did fantastic," said analyst Brad Rubin of BNP Paribus. "It's still going to be difficult and they're going to need a lot of concessions to consistently be profitable."
GM continues to lose market share to foreign rivals. For the first time, GM ceded the No. 1 spot in global auto sales to Japan's Toyota Motor Corp. in the first quarter of the year.
And while GM remains the top automaker in the United States, its sales are down 6.8 percent through June compared to a year ago, and it has lost more than a percentage point of its U.S. market share, which slipped to 22.8 percent
GM, at least, didn't have to deal with a loss at its former finance arm. GMAC reported a surprising second-quarter profit of $239 million, less than last year's $787 second-quarter second million profit, but an improvement from last quarter's $305 million loss. GM last year sold 51 percent of its stake in GMAC.
GM has managed to pare losses in the last year. The automaker improved significantly in 2006, posting a $2 billion loss compared to $10.5 billion in 2005.
GM performed well in regions outside North America.
GM Europe made $217 million, up from a $39 million loss last year. The results are the strongest for the region since 1996.
GM Asia Pacific made $227 million, down from $376 million a year ago. Last year's profit included $212 million from the sale of GM's interest in Isuzu.
GM Latin America, Africa and Middle East posted its best quarterly net income in a decade. The region made $213 million, compared to $139 million a year ago.
