GM 2Q net earnings fall on loss from sale of European unit
But profits in international operations, including China, nearly doubled
General Motors’ second-quarter net profit fell more than 40 per cent as the company lost money on the sale of its European unit and took charges for restructuring in India and selling its business in South Africa.
The company posted net income of $1.66 billion, compared with a record $2.87 billion a year ago. But when the European loss and onetime items are stripped out, GM still made $2.4 billion from continuing operations, or $1.89 per share. That’s down 12 per cent from last year but still easily beat Wall Street estimates. Analysts polled by FactSet expected only $1.68 per share.
Revenue was $37 billion excluding Europe, falling short of analyst estimates of $40.3 billion.
Chief Financial Officer Chuck Stevens called it a strong quarter with pre-tax earnings of $3.7 billion. That’s down $100 million from a year ago, due largely to a $270 million drop in North America that Stevens attributed to production cuts as the company ramps up to launch new Silverado and Sierra full-size pickup trucks.
GM’s bottom line includes a $770 million loss as GM prepares for the sale of its European Opel and Vauxhall brands to France’s PSA Group, owner of Peugeot and Citroen. It also includes $654 million in one-time items from restructuring in India, the sale of GM’s South Africa business and lingering legal costs from an embarrassing ignition switch recall. Stevens said the sale to PSA is on track to close by the end of the year.
Pre-tax profits in North America, GM’s most lucrative region, fell 14 per cent for the quarter to $3.48 billion.
But profits in international operations, including China, nearly doubled to $340 million. GM also narrowed its loss in South America from $118 million to $23 million. Profits at its loan-making unit rose 67 per cent to $357 million.
GM made a strong profit in the U.S. even though sales were down 4 per cent for the quarter. That’s because much of the sales drop came from lower-profit cars, which were down 19 per cent. Truck and SUV sales rose 3 per cent, and that pushed up GM’s average sales price per vehicle up 3 per cent to $39,118, according to Edmunds.com.