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DETROIT (AP) — DETROIT (AP) – After years of big discounts, GM is
charging customers more for its cars and trucks, and it’s helping
the bottom line.
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General Motors Co. said Thursday its second-quarter profit nearly
doubled. A big reason was higher prices for its vehicles, which
boosted ITS profits in every region of the world.
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The company’s net income totaled $2.5 billion, or $1.54 per share.
That compared with $1.3 billion, or 85 cents per share, in the same
quarter a year earlier. It was GM’s third straight quarterly profit
since its initial public stock offering in November, and its sixth
straight overall.
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The results were stronger than those of Ford and Chrysler, which
reported last week. Chrysler posted a loss on a big repayment of
government debt. Ford’s earnings took a hit as it expanded in Asia,
a region where GM is dominant.
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GM Chief Financial Officer Dan Ammann said the company gained $1
billion from higher prices for its cars and trucks. More than half
of that came from North America.
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But he also warned that the company’s performance for the rest of
the year probably won’t be as strong.
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In the second quarter, though, GM ran its business well. It pulled
back on rebates and other deals when a severe earthquake in Japan
left rivals such as Toyota Motor Corp. and Honda Motor Co. short of
cars to export. When demand for small cars rose in the spring
because of high gas prices, GM was able to match it with a new
Chevrolet Cruze while Toyota and Honda sat on the sidelines. GM’s
incentive spending per vehicle fell 20 percent to $3,022 in June,
according to car pricing site TrueCar.com
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Popular models like the Chevrolet Equinox and GMC Terrain, which
get 32 mpg on the highway, also didn’t need rebates to sell well
because of high pump prices. The company also raised prices to
compensate for the higher costs of raw materials such as
steel.
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But higher car prices may not hold in the second half of the year,
when Japanese inventories are restocked and competition heat ups.
GM has vowed not to return to its old ways of doing business, when
it overproduced vehicles just to keep its factories open and then
offered huge discounts to sell them off.
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Second-quarter revenue rose 19 percent to $39.4 billion, while
sales rose 7 percent. Although sales softened somewhat in the U.S.
and Europe because of buyers’ worries about the economy, GM gained
market share in every region outside South America.
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It was the first time since GM emerged from bankruptcy protection
two years ago that all of its regions were profitable. Europe,
which is undergoing a restructuring, posted a profit of $100
million, versus a loss a year earlier. In North America, where the
bulk of GM’s profits come from, the company earned $2.2 billion, up
from $1.6 billion.
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GM won more customers in the U.S. thanks to the Cruze, which was
the best-selling car in America in June. The Cruze also sold well
in China, where Chevrolet’s June sales rose 34 percent.
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“GM’s investments in fuel economy, design and quality are paying
off around the world,” GM Chairman and CEO Dan Akerson said in a
statement.
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But GM’s shares have been trading far below the IPO price of $33
from November. Investors are concerned about the economy and the
health of a company that is just two years out of bankruptcy
protection. GM reported its biggest profit in more than a decade in
the first quarter, but its stock fell as investors noted that
nearly half the profit was from the sale of GM’s stake in an auto
parts company.
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Although GM made $5.7 billion in the first half of the year, Ammann
said the company’s second half performance will probably not be as
robust, since there is usually a drop in sales in the fall and the
economy is shaky.
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“There’s a high level of uncertainty out there,” he
said.
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GM’s stock price fell to a low of $25.83 Thursday, down with the
rest of the market.
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GM’s results are being closely watched by the U.S. government,
which still holds 500 million GM shares that it got as part of the
company’s 2009 bailout package. The government needs $26.4 billion
to recoup its full investment in GM, meaning GM’s shares would have
to sell for roughly $53 per share.
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The Treasury Department said in May that it would wait until this
month, at the earliest, to sell more GM shares. But it could also
decide to wait until after GM completes its latest contract talks
with the United Auto Workers union. The UAW contract expires Sept.
14.
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