GM News: GM's Second-Quarter Sees Earnings Drop By 40%, Profit Up

[William Maley]

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William Maley

Staff Writer - CheersandGears.com

August 2, 2012

General Motors released their second quarter earnings report and the results are a bit disappointing. The company posted a net income of $1.5 billion and a revenue of $37.6 billion. Those numbers are significantly down from the same figures in the second quarter of 2011, when GM posted a net income of $2.5 billion and a revenue of $39.4 billion. That's a drop of 40% in income and a 4.6% drop in revenue.

This announcement comes a day after GM released their sales results for July, which saw sales drop by 6% compared to 2011 sales. Part of the decline was due to declining fleet and rental sales. The other part was due to competitors like Toyota and Honda clawing back sales they had lost due the earthquake and tsunami last march.

“Our results in North America, our International Operations and at GM Financial were solid but we clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America,” said GM CEO Dan Akerson.

Europe was what hurt GM the most, posting a $400 million loss in the second quarter. That's a 400% increase when compared to a $100 million loss in the second quarter of last year. South America operations broke even in this quarter, but had posted $100 million profit in the second-quarter of 2011. GM International Operations, which includes the Chinese and Indian markets, posted a profit of $600 million, which matches second quarter results from last year.

North America was one bright spot for GM, posting a $2 billion profit for the quarter, down from $2.2 billion in the second quarter of 2011.

William Maley is a staff writer for Cheers & Gears. He can be reached at [email protected] or you can follow him on twitter at @realmudmonster.

Press Release is on Page 2

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GM Reports Second Quarter Net Income of $1.5 Billion and EBIT-adjusted of $2.1 Billion

DETROIT – General Motors Co. (NYSE: GM) today announced second quarter net income attributable to common stockholders of $1.5 billion, or $0.90 per fully diluted share. In the second quarter a year ago, GM’s net income attributable to common stockholders was $2.5 billion, or $1.54 per fully diluted share.

Net revenue in the second quarter of 2012 was $37.6 billion, compared with $39.4 billion in the second quarter of 2011. The decrease was due almost entirely to the strengthening of the U.S. dollar versus other major currencies. Earnings before interest and tax (EBIT) adjusted was $2.1 billion, compared with $3.0 billion in the second quarter of 2011. Total restructuring expense included in EBIT-adjusted for the second quarter of 2012 was $0.1 billion.

“Our results in North America, our International Operations and at GM Financial were solid but we clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America,” said GM chairman and CEO Dan Akerson. “Despite the challenging environment, GM has now achieved 10 consecutive quarters of profitability, which is a milestone the company has not achieved in more than a decade.”

GM Results Overview (in billions except for per share amounts)

Q2 2012

Q2 2011

Revenue

$37.6

$39.4

Net income attributable to common stockholders

$1.5

$2.5

Earnings per share (EPS) fully diluted

$0.90

$1.54

Impact of special items on EPS fully diluted

-

-

EBIT-adjusted

$2.1

$3.0

Automotive net cash flow from operating activities

$3.8

$5.0

Automotive free cash flow

$1.7

$3.8

Segment Results

• GM North America (GMNA) reported EBIT-adjusted of $2.0 billion, compared with $2.2 billion in the second quarter of 2011.
  
• GM Europe (GME) reported an EBIT-adjusted loss of $0.4 billion, compared with EBIT-adjusted of $0.1 billion in second quarter of 2011.
  
• GM International Operations (GMIO) reported EBIT-adjusted of $0.6 billion, equal to the second quarter of 2011.
  
• GM South America (GMSA) reported breakeven results on an EBIT-adjusted basis, compared with EBIT-adjusted of $0.1 billion in the second quarter of 2011. The second quarter 2012 results include $0.1 billion in restructuring expenses.
  
• GM Financial earnings before tax was $0.2 billion for the quarter, compared with $0.1 billion a year ago.
  
• In the Corporate segment, GM reported EBIT-adjusted of $(0.2) billion, of which $(0.1) billion was attributable to a non-cash foreign exchange loss.
  

Cash Flow and Liquidity

For the quarter, automotive cash flow from operating activities was $3.8 billion and automotive free cash flow was $1.7 billion. GM ended the quarter with very strong total automotive liquidity of $38.5 billion. Automotive cash and marketable securities was $32.6 billion, compared with $31.5 billion at the end of the first quarter of 2012.

At the end of the first quarter, GM indicated that GMNA’s results for the second and third quarters of 2012 were expected to be comparable to the first quarter. Second quarter GMNA results were stronger in part due to timing of spending that was deferred to the third quarter. GM continues to expect that the average of its second and third quarter EBIT-adjusted in GMNA will be comparable to first quarter results.

“We’re executing an aggressive product plan around the world, and at the same time we are working systematically to simplify the business and truly leverage our scale to grow our margins,” said Dan Ammann, senior vice president and CFO.

General Motors Co. (NYSE:GM, TSX: GMM) and its partners produce vehicles in 30 countries, and the company has leadership positions in the world's largest and fastest-growing automotive markets. GM’s brands include Chevrolet and Cadillac, as well as Baojun, Buick, GMC, Holden, Isuzu, Jiefang, Opel, Vauxhall and Wuling. More information on the company and its subsidiaries, including OnStar, a global leader in vehicle safety, security and information services, can be found at http://www.gm.com.

Forward-Looking Statements

In this press release and in related comments by our management, our use of the words “expect,” “anticipate,” “possible,” “potential,” “target,” “believe,” “commit,” “intend,” “continue,” “may,” “would,” “could,” “should,” “project,” “projected,” “positioned” or similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors. Among other items, such factors might include: our ability to realize production efficiencies and to achieve reductions in costs as a result of our restructuring initiatives and labor modifications; our ability to maintain quality control over our vehicles and avoid material vehicle recalls; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt, including as required to fund our planned significant investment in new technology; the ability of our suppliers to timely deliver parts, components and systems; our ability to realize successful vehicle applications of new technology; the overall strength and stability of our markets, particularly Europe; and our ability to continue to attract new customers, particularly for our new products. GM's most recent annual report on Form 10-K and quarterly reports on Form 10-Q provides information about these and other factors, which we may revise or supplement in future reports to the SEC.

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[G. David Felt]

With the Euro Depression these numbers are about what I expected. I think there is more GM can do to increase efficiencies but anyone who was aware of the world issues should have expected a drop since the Asian companies came back online after the problems in that country.

[riviera74]

http://www.bbc.co.uk/news/business-18862393

Even with Japan inc. back online, Europe is still an albatross. VW owns Europe in a way that GM used to own the USA (1930-1968). Unlike the USA, Europe stubbornly refuses to allow real restructuring in any industry, least of all cars. It is past time to euthanize the union-run auto industry in Europe for good.

[Drew Dowdell]

I still maintain that GM's woes in Europe are not directly capacity related but distribution related. Their dealer network there, across all of the brands they sell in Europe, is woefully inadequate compared to the natives. If anyone has a source of dealership numbers to confirm, I'd love to see it, but my feel is that Opel dealers are outnumbered by VW 4 to 1 in Germany and twice that outside of Germany. In France, Citroen, Peugot, and Renault dominate (of course) but I don't recall seeing a single Opel dealership in the week I was traveling around Paris while I saw multiple installations of the French brands.... and this was one of two Chevrolet dealers I spotted.

While I love the vintage Olds, shouldn't there be a new Cruze in the window?

[ocnblu]

Are you sure that is a new car dealer? Or is it a separated GM dealer that now sells only used vehicles?

[Robert Hall]

Are you sure that is a new car dealer? Or is it a separated GM dealer that now sells only used vehicles?

Looking at their website, it looks like they are a new car dealer..Chevy and Cadillac.

http://www.jeancharlesautomobiles.fr/

[ocnblu]

Good Lord, I hope that's the back door.

[Drew Dowdell]

That is the front. In the other window is a vintage Camaro, but no new cars to be seen. This is in the very heart of Paris. Drive that Olds through the plate glass and the Eiffel Tower is almost directly in front of you.

[A Horse With No Name]

That is the front. In the other window is a vintage Camaro, but no new cars to be seen. This is in the very heart of Paris. Drive that Olds through the plate glass and the Eiffel Tower is almost directly in front of you.

Cool...

[FAPTurbo]

LOOLOL! Nothing says 'Buy General Motors' like an Olds B-body in the front window!

[ocnblu]

Maybe the new cars are locked out of sight... maybe it's a seedy part of town.