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GM profit doubles as global sales and prices rise
Demand for smaller cars rise with higher prices at gas pump
Question of the Day
DETROIT — After years of big discounts, GM is charging customers more for its cars and trucks, and it’s helping the bottom line.
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.
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.
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.
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. But he also warned that the company’s performance for the rest of the year probably won’t be as strong.
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.
Popular models like the Chevrolet Equinox and GMC Terrain, which get 32 miles per gallon 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.
But higher car prices may not hold in the second half of the year, when Japanese inventories are restocked and competition increases. 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.
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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