Strong pickup market boosts GM

US sales of trucks booming, but yen hurts firm's gains
2013-07-26T00:00:00Z Strong pickup market boosts GMThe Associated Press The Associated Press
July 26, 2013 12:00 am  • 

DETROIT - Just as General Motors is getting a handle on its troubles in Europe, the automaker faces a new challenge in another part of the globe.

GM says Japanese automakers are using the weak yen to cut prices in Southeast Asia and Australia, taking a bite out of GM's profits there. Sales tailed off in India as well.

A subpar second-quarter performance in the company's international operations division pulled GM's overall profit down 16 percent from last year, offsetting gains in North America and a stark improvement in Europe.

The company's shares fell 6 cents to close at $37.08 Thursday.

The Detroit automaker earned $1.26 billion from April through June, or 75 cents per share. That's down from $1.5 billion, or 90 cents per share, a year ago.

Still, GM handily beat Wall Street predictions when one-time items were excluded. On that basis, GM earned 84 cents per share in the quarter, 9 cents better than the forecast of analysts surveyed by FactSet.

In North America, strong sales of pickup trucks drove pretax profit up 4 percent to $1.98 billion.

U.S. sales of big pickups boomed in the first half, rising 23 percent as the housing industry started to recover from the Great Recession and small businesses started buying again. At GM, Silverado sales gained 26 percent and Sierra sales rose 21, helping North American profits.

Pickups are GM's top-selling vehicles, and they bring in an estimated profit of $10,000 apiece.

Chief Financial Officer Dan Ammann said he expected improved performance in the second half as GM gets the full benefit of rolling out the new trucks, as well as the 2014 Chevy Corvette sports car, an all-new Cadillac CTS sedan and other new models.

"That's going to give us a good tail wind into the second half," he said.

But Ammann also described headwinds in Asia-Pacific countries outside of China. He said Japanese rivals used a weaker yen to cut prices, forcing GM to respond in kind and lowering its profits.

Although pretax income rose in China, GM's International Operations profit fell by $400 million to $228 million.

In Europe, GM cut $284 million off its loss from last year, narrowing it to $110 million as cost cuts kicked in and new products such as the Opel Mokka small crossover SUV and Adam subcompact car sold well, Ammann told reporters.

Ammann said GM's year-over-year performance in Europe should improve as cost cuts and more new products take hold, but the second half might worsen due to a normal seasonal slowdown.

Overall, GM's revenue rose 4 percent to just over $39 billion, beating Wall Street's estimate of $37.7 billion. Worldwide sales rose 4 percent to 2.49 million vehicles.

GM's earnings come a day after its closest U.S. competitor, Ford Motor Co., reported better-than-expected profits, especially in Asia. Ford earned $1.23 billion, up 18.5 percent from a year ago.

Still on the hook

General Motors stock would have to sell for $95.51 per share for taxpayers to break even on bailing out the company, according to a government watchdog's report released this week.

That price is about three times what GM shares are selling for now, even after a 25 percent increase in the price so far this year.

Taxpayers are still $18.1 billion in the hole on the $49.5 billion bailout, including interest and dividends, according to the report.

GM got the bailout to help it survive bankruptcy restructuring in 2009. Since emerging from bankruptcy, the restructured company has piled up $17.2 billion in profits.

The government has gradually been selling off its GM stock, with the goal of exiting the investment by April of next year. As of June 6, it still owned 189 million shares, or about 14 percent of the company, according to the report.

If the government sells its remaining shares of GM for the current stock price of $36.61, it would get just over $6.9 billion, meaning taxpayers would lose about $11.2 billion on the bailout.

- The Associated Press

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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