Pricey truck sales boost GM earnings

STRONG demand for pricey, high-end trucks in North America boosted General Motors’ (GM’s) earnings, offsetting lower car sales, especially i n China, t he company announced on Thursday.

The biggest US ca r maker reported slight ly higher second- qu a r t e r pr of i t s , a nd h ig h l ig hted t he lau nch of upgraded pickup truck models aimed at t he US market, where the economy is strong and demand has held up.

The result was a record average price of $37,126 in North America in the quarter, boosting operating income in the region even as the number of vehicles sold in the quarter fell there and in other markets.

GM has also cited lower costs following a reorganisation announced late last year that cut thousands of jobs and closed factories, drawing criticism from politicians from across the political spectrum.

“We’re rea lly sta rting to see t he earnings potentia l of t he t r uck enter pr ise,” sa id GM chief f inancial off icer Dhiv ya Sur yadevara.

The results came as Moody’s lowered its outlook to “negat ive” on t he globa l automotive market, projecting lower sales in 2019 and 2020 and citi ng “f u r t her wea ken i ng i n demand in Western Europe a nd i n Ch i na, which was affected by the ongoing USChinese trade ta lks”.

Net income rose to $2.4 billion, up 1.2 per cent year-on-year.

But revenues fel l 1.9 per cent to $ 36.1 billion, as global vehicle sa les dropped 6.1 per cent, a decline of more than 125,000 cars.

In North America, GM vehicle sales fell four per cent, clipped in part by lower inventories of some trucks as the company rolls out the updated models.

Suryadevara described the launches as “cadenced”, aimed first at the light-duty pickup ma r k e t w h e r e v e h i c l e s endowed with state-of-the-art connectivity and other features command prices of $45,000 and higher. GM’s market share in this segment rose during the quarter.

The carmaker plans to unveil heavier pickup truck models through the rest of this year and into next year, as well as make available more light pickups at lower prices.

Suryadevara shrugged off analyst concerns that truck launches by Fiat Chrysler and other automakers will dent these profits, pointing to the strong US economy and the age of the fleet being replaced.

“We think the fundamentals remain strong, especially in the truck market,” Suryadevara told reporters on a conference call.

The company suffered a 12.2 per cent drop in vehicle sales in China, where demand was dampened by the slowing economy and pricing pressure. GM, which had previously projected flat auto sales this year in China, now projects a decline.

Suryadevara said the company reduced vehicle inventory by about 10 per cent in China and took other measures to reduce costs.

The company plans a series of vehicle launches in China in the second half of the year that should sell well, but Suryadevara said macro conditions remained challenging.