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GM posts 2Q profit of $1.33 billion
DETROIT (AP) — General Motors Co. said Thursday it made $1.33 billion in the second quarter, a sign it’s getting healthier as it prepares to sell stock to the public. The results were strong enough that CEO Ed Whitacre announced he will step down next month, saying his job was done.
It was the second straight quarterly profit for the Detroit automaker, which made $865 million in the first quarter, and sets the stage for GM to file paperwork soon to start the public stock sale process.
Mr. Whitacre said last week the company is eager to sell shares in an initial public offering so it can end its dependence on the government and pay off $43.3 billion in bailout funds that were converted into a majority stake in the company. Mr. Whitacre wants the company to shed its “Government Motors” moniker because it’s hurting sales and the company’s image.
But it’s unclear whether the recent record of profits — $2.2 billion for the first half of 2010 — is enough to persuade investors. GM lost $88 billion in the five years before it filed for bankruptcy protection last June.
Although GM is performing well, the timing still isn’t right for it to sell shares in the next few months because of the sputtering economy, said Scott Sweet, senior managing partner of IPO Boutique in Tampa, Florida, which advises investors on IPOs.
Several recent IPOs have been postponed because of concerns that they won’t get a high enough share price, he said. He also said the Obama administration is pressuring GM to sell prematurely to influence the November congressional elections. Last week, Mr. Whitacre said the elections are not being considered, and the government repeatedly has said GM is in charge of the sale timing.
The quarterly results were good enough for Mr. Whitacre. The 68-year-old Texan said he will step down as CEO Sept. 1 and turn the job over to board member Daniel Akerson. Like Mr. Whitacre, Mr. Akerson has experience turning around telecommunications companies. Mr. Akerson has been on GM’s board for a year.
“I believe we’ve accomplished what we set out to do,” Mr. Whitacre said.
GM’s second-quarter revenue totaled $33.2 billion, up 5.3 percent from the first quarter on growing sales in every region except Europe. In the United States, GM saw strong sales of new and redesigned models such as the Chevrolet Equinox wagon and Buick LaCrosse sedan.
Its North American unit, long a source of losses, has turned into a profit machine, making $1.59 billion before interest and taxes in the second quarter, up 31 percent from the first quarter. Profits from its international operations, which include China and Brazil but exclude Europe, dropped 42 percent to $672 million, and GM lost $160 million in Europe.
Much of the North American profit came because it is getting higher prices for cars, trucks and crossovers. For example, GM said buyers paid 11 percent more, or $3,000 on average, for crossovers than they did in the second quarter of last year. Crossovers look like sport utility vehicles but are more efficient because they are based on car undercarriages.
GM said it earned $2.55 per share for the quarter. It didn’t report second-quarter results last year because it spent part of the quarter in bankruptcy protection, but on Thursday GM said it lost $12.9 billion in the second quarter of 2009, or $21.12 per share.
So far, GM’s results are a reversal of fortune from 2009, when it lost $4.3 billion from July 10, the day it exited bankruptcy court, through Dec. 31. Before the first-quarter results, GM hadn’t reported a profit since the second quarter of 2007.
GM said it ended the quarter with $32.5 billion in cash, down from $36 billion in the first quarter.
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