GM reports strong results

General Motors’ strategy of focusing on retail sales in North America paid off in the second quarter, with net income more than doubling from the year-earlier quarter, according to Automotive News Europe. GM reported overall net income (all amounts in NZ dollars) of $4.1 billion in the second quarter, up from $1.6 billion in the second quarter of 2015. “This was an outstanding quarter for GM,” CEO Mary Barra said in a statement. The carmaker raised its earnings guidance for 2016, saying it expects to make between $7.86 and $8.58 a share for the year, up from its previous projection of $7.50 to $8.22 a share. Revenue rose 11 per cent to $60.56 billion, a record for any quarter since GM’s emergence from bankruptcy in July 2009. GM shares rose in early trading, up 2.2 per cent to $45.98 on July 21. In North America, GM’s earnings before interest and taxes jumped 31 per cent to $5.22 billion, despite a drop of 5.7 per cent in overall North American unit sales during the period. The carmaker has been focusing on selling fewer cars into the fleet market, which is less profitable than retail. That strategy boosted its profit margins in the quarter to 12.1 per cent from 10.5 per cent a year ago. On the other hand, it says earnings were trimmed by lower prices at auction of GM-owned cars coming out of rental fleets. European operations swung to a profit in the quarter of $196 million, vs. a loss of $64.32 million a year earlier, marking two quarters in a row of break-even or better results. However, it says the UK vote to leave the European Union created uncertainty in the UK automotive industry. That could have an impact of up to $572 million on the second half. Income from GM’s joint ventures in China was flat vs. year ago, at $714.64 million. Its profit margin fell to 9.5 per cent from 10.2 per cent a year ago. Earnings at GM's international operations, which include China, fell 52 per cent to $241.55 million. GM blames difficulties in its Middle East operations in the wake of low global oil prices, plus currency pressures, particularly the Egyptian pound and Australian dollar. GM says it expects economic conditions in its consolidated international operations to "remain difficult," with the second half to be similar to the first. For the first half, international operations' earnings fell 24 per cent to $783.25 million. GM Financial posted second-quarter net revenue of $3.27 billion, up 51 per cent, and pretax income of $380.19 million, up 18 per cent. Both were records since GM acquired AmeriCredit in 2010 and began transforming the company into a captive lender. It was the second-biggest contributor to GM's bottom line, following North America. GM Financial's net income rose 1.6 per cent to $270.14 million. The slower rise in net came as the company's income-tax provision nearly doubled to $110.06 million from $55.74 million a year earlier.