Europe whittles down GM's strong second-quarter profit

Profits at General Motors Co. fell by 19% during the second quarter as losses in Europe continued to offset strong sales in North America.

GM posted a proft of $1.2 billion, down from $1.5 billion in the same period a year earlier. Revenue rose 4% to $39.1 billion compared to the same period a year earlier.


"We continue to perform well in the world's two most important markets, the U.S. and China," Dan Akerson, GM's chief executive, said Thursday. "We also made further progress in our European business and saw the steady performance of our global brands Chevrolet and Cadillac."

In part because the losses in Europe were less than expected, GM's profit beat Wall Street's expectations, said Brian Johnson, an analyst at Barclays Research.

GM's profit equalled 84 cents a share compared to Johnson's estimate of 77 cents and the Wall Street analyst consensus of 76 cents.

GM and its domestic rivals are benefiting from a robust U.S. auto market that has seen sales of pickup trucks – among the most profitable vehicles in the industry – soar as the housing and construction industries rebound from the recession.

"Things couldn't be better thanks to the nascent U.S. housing recovery," Akerson said.

The automaker's North American operating profit rose more than 4% to nearly $2 billion in the second quarter.

Chief Financial Officer Dan Ammann said GM's U.S. business during the second half of this year should be strong as it rolls out redesigned models of several signature vehicles, including its Chevrolet Silverado pickup truck, Cadillac CTS sedan and Chevrolet Corvette sports car.

Although GM continues to lose money in recessionary Europe, its losses slowed in the latest quarter to $110 million from $394 million in the same period a year earlier. But Akerson cautioned that a turnaround in the region "isn't in sight yet."

Profits slid $228 million from $627 million in GM’s international division, which is made up mostly of business in China and Asia.

Although GM's China business remains healthy, softness in Indian and Russian auto markets  hurt the results, as well as tougher competition from Asian competitors in Australia, Amman said. GM was also hurt by warranty and recall issues in its international divisions.

"We will continue to have impact from all of those things heading into the third quarter," Ammann said.

But there was improvement in South America, where GM posed an operating profit of $54 million compared to $16 million a year earlier.

On Wednesday, Ford Motor Co. said its second-quarter profit rose 18.5% to a $1.2 billion. Revenue rose 14.4% to $38.1 billion. Ford's gains were powered by brisk sales of profitable pickup trucks, growing business in China and fewer losses in Europe.

GM's shares fell 19 cents to $36.95 in early trading.


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