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GM posts its third profitable quarter
Question of the Day
DETROIT — General Motors Corp. ran its string of profitable quarters to three yesterday when it announced second-quarter net income of $891 million that came largely from overseas operations.
The earnings growth in Europe, Latin America, Asia and other areas eclipsed lingering problems in North America. Although GM showed vast improvement in its back yard, it still posted a net loss of $39 million there.
Nonetheless, quarterly profits announced by GM and Ford raised hopes that at least two of the three U.S. automakers were headed in the right direction after billion-dollar losses and talk of bankruptcies.
“I think it’s brightening up,” David Healy, an analyst with Burnham Securities, said of the clouds that had been hanging over Detroit. “Both companies have shrunk about one-third of their hourly work force and they’ve closed a lot of plants. They’re basically adjusting to the level of business that they’re doing now.”
Ford Motor Co. last week posted its first quarterly profit in two years at $750 million, although the company warned that it had not turned the corner to consistent profitability. Chrysler Group’s second-quarter earnings results have been delayed until this month by the pending sale of 80.1 percent of the company to Cerberus Capital Management LP.
The second-quarter profits may be bad timing, coming on the heels of the formal start to contract talks with the United Auto Workers, although analysts say the companies still can point to losses in North America to show the need for concessions.
GM’s second-quarter profit was a huge reversal from the $3.4 billion loss it posted in the same period last year.
“Our heavy commitment to key growth markets around the world really paid off in strong growth and earnings,” Chairman and Chief Executive Officer Rick Wagoner said.
The net loss in North America was a major improvement over the second quarter of last year, when GM lost $3.95 billion.
In the second quarter of 2006, GM took a giant after-tax charge of $3.7 billion for early retirement and buyout offers that eventually reduced its hourly work force by more than 34,000.
The latest profit amounted to $1.56 per share for the April-to-June period, compared with a loss of $5.98 per share a year ago.
Revenue fell to $46.8 billion from $53.9 billion a year ago largely because of the sale of 51 percent of GM’s former financial arm, GMAC Financial Services.
The latest profit total included $520 million in charges associated with the bankruptcy reorganization of Delphi Corp., GM’s former parts arm, and other restructuring costs for GM’s North American unit.
GM shares fell 21 cents to $32.40 in trading on the New York Stock Exchange yesterday after rising as high as $34.65 earlier in the session.
The Detroit company said its net income from continuing global automotive operations was $618 million, compared with a net loss of $3.48 billion in the year-ago period.
By Scott Pinsker
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