Pending sale of Europe unit hits GM earnings

DETROIT — General Motors’ second-quarter net profit fell more than 40 percent as the automaker lost money on the pending sale of its European unit and warned it still faces billions of dollars in further losses to come.

GM made net income of $1.66 billion, compared with a record $2.87 billion a year ago. But when the European loss and one-time items are stripped out, GM made $2.4 billion from continuing operations, or $1.89 per share. That’s down 12 percent 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.

GM’s bottom line includes a $770 million loss as it 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.

GM agreed to sell its European operations to PSA in March for $2.2 billion, and the company disclosed Tuesday in a regulatory filing that it expects to take a $5.5 billion to $6 billion charge from the sale to be counted when the deal closes — expected by the end of this year.

The charge includes $3.9 billion in previous losses that GM will not be able to use to offset future tax obligations.

Chief financial officer Chuck Stevens called the second-quarter performance strong with pretax 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 fullsize pickup trucks.

Stevens reaffirmed guidance of $6 to $6.50 pretax earnings per share for the full year.