General Motors Profit Falls 30%
General Motors Corp., the world’s largest automaker, said second-quarter profit plunged 30% as lower demand for cars forced it to cut production and raise rebates.
Net income declined to $901 million, or $1.58 a share, for the Detroit-based company from $1.29 billion, or $2.43, in the same period last year. Sales were unchanged at $48.3 billion.
Chief Executive Rick Wagoner cut North American production 12% in the quarter and raised no-interest loans and rebates to record levels as Japanese rivals gained U.S. market share.
General Motors, whose quarterly profit from North America plunged 94%, spent $1,700 more on incentives per vehicle than Toyota Motor Corp., according to CNW Marketing Research.
The company said it expected to earn more than 45 cents a share in the third quarter. General Motors said full-year profit probably would be $4.50 to $5 a share, excluding its Hughes Electronics Corp. unit and certain items.
Shares of General Motors fell 18 cents to $35.74 in New York Stock Exchange composite trading.
Profit from General Motors’ North American division fell to $83 million from $1.28 billion for the year-ago quarter. It was its worst performance since the company lost $254 million in North America in the fourth quarter of 2000.
With vehicle production down in North and South America, almost all of General Motors’ quarterly profit came from financing automobiles and homes through its General Motors Acceptance Corp. finance arm.
Net income for the finance unit almost doubled to $834 million from $431 million as homeowners took advantage of low interest rates to refinance their mortgages. Income from its mortgage business increased sevenfold to $415 million, while profit from automobile financing increased 14% to $396 million.
General Motors, which still trails Toyota and Honda Motor Co. in quality studies, has sought to win back customers from Japanese automakers by eliminating defects and recalls.
U.S. sales of General Motors brands, which include GMC and Chevrolet, fell 1.4% in the second quarter after an 8.8% drop in the first quarter. That prompted the company to scale back production at factories such as its Saturn plant in Wilmington, Del.
