GM’s earnings increase fivefold
Strong sales in U. S. propel $ 1.12B second- quarter profit
DETROIT — General Motors reported Thursday that its second- quarter earnings quintupled from a year ago, despite taking charges for currency fluctuations and asset writedowns in foreign markets.
GM, the nation’s largest automaker, said it earned $ 1.12 billion during the quarter, compared with $ 190 million in the same period in 2014. The performance exceeded analysts’ expectations and highlighted the continuing strength of the automaker’s core North American operations.
The company took charges of $ 1.11 billion during the quarter, including about $ 600 million for a currency devaluation in Venezuela and about $ 400 million for asset impairments in Thailand and other international operations.
In the second quarter of 2014, GM recorded special charges of $ 1.28 billion, primarily to pay for vehicle recalls, including the recall of millions of small cars with defective ignition switches tied to at least 124 deaths.
Mary Barra, GM’s chief executive, said the strong earnings in this year’s second quarter reflected the company’s continued success in the U. S. market.
GM also managed to earn a pretax profit in China, despite weaker economic conditions there. The company narrowed its losses in Europe, but it did worse in South America than in the same period in 2014.
“The first two quarters of the year were strong as we fully capitalized on a robust North American industry and maintained our strength in China, despite the challenging conditions in that market,” Barra said.
GM said it had pretax profits of $ 2.78 billion in North America, compared with $ 1.39 billion in the second quarter of last year.
Its international division, which includes China, reported pretax profits of $ 349 million, up from $ 315 million in the same period of 2014.
In Europe, GM lost $ 45 million during the quarter, which was an improvement from a $ 305 million loss in the region last year. It reported a pretax loss of $ 144 million in South America, compared to an $ 81 million loss during the same period in 2014.
Overall, GM’s global revenue for the quarter was $ 38.2 billion, down from $ 39.6 billion in the second quarter of 2014. Company officials attributed the drop to the negative impact of foreign currency changes.
Industry analysts predict that GM could be facing pressure on profits in China, where vehicle sales are falling.
But the company’s chief financial officer, Chuck Stevens, expressed confidence that GM could maintain its profit margins in both North America and China, its two largest markets. “We expect continued strong performance in these key markets,” Stevens said.
Shares of GM rose $ 1.20, or 4 percent, to close Thursday at $ 31.50.
GM also announced Thursday that the Federal Trade Commission is investigating whether dealers advertised certified used cars for sale even though they needed repairs under existing recalls.
The agency notified GM of the inquiry on June 3.
GM said in the filing that it’s investigating and cooperating with the investigation. A spokesman wouldn’t give further details.
Federal law bans the sale of new cars with unfixed recalls, but dealers can legally sell used cars that haven’t been fixed.
It’s unclear what law may have been broken, but the agency often investigates allegations of misleading advertising. An FTC spokesman wouldn’t comment.