GM posts $891 million second-quarter profit

Good news for the world's largest automobile manufacturer. Ironically enough, it's GM's foreign markets that are keeping it afloat. It looks like GM is going to have to transition itself into more of a 'global' company (image-wise, that is)...


GM posts $891 million second-quarter profit

http://www.iht.com/articles/2007/07/31/business/gm.php

NEW YORK: General Motors' global business helped lift the company to a profit in the second quarter, the automaker said Tuesday, but problems in North America continued to act as a drag.

Over all, GM earned $891 million, or $1.56 a share, compared with a loss of $3.4 billion, or $5.98 a share, a year earlier.

The company's North American operations - the centerpiece of its business - generated a $39 million loss in the quarter. That was an improvement from the second quarter of 2006, when losses totaled $3.95 billion in North America.

Still, the company acknowledged that it had not made enough progress.

"It's true that our North America team has made huge improvements," Rick Wagoner, the chief executive, said in a statement. "But our current earnings clearly demonstrate we've got more to do."

GM embarked on a restructuring plan in late 2005 that called for it to close all or part of a dozen plants and eliminate 30,000 jobs. The plan was aimed primarily at stemming the company's red ink in North America, the main reason for a near-record loss of $10.6 billion in 2005 and a $2 billion loss last year.

The company said that restructuring costs led to a special charge of $88 million in the second quarter. Costs for assisting its former parts supplier Delphi with bankruptcy restructuring added another $374 million in special charges.

GM's North American loss in the second quarter, usually the strongest of the year for the Detroit auto companies, is more proof of the continued problems the automakers are having in fighting foreign competition despite their aggressive restructuring plans.

Ford, which posted an $750 million profit during the quarter, said last week that it lost $279 million in North America. It plans to cut about 44,000 jobs in North America and close factories.

Even so, analysts were pleased that GM had positive cash flow of about $1.1 billion during the quarter, although they noted the company had reduced its capital spending plans to about $8 billion a year from a previous forecast of $8 billion to $9 billion annually.

Jonathan Steinmetz, an analyst with Morgan Stanley, termed the results "better than expected." Like Ford, GM does not issue guidance to Wall Street, a reason that both companies' second-quarter profits were above analysts' estimates.

Shares of GM jumped once trading opened on the New York Stock Exchange, rising as much as 5 percent this morning.

Elsewhere in the world, GM posted improved profits. In Europe, the company earned $217 million; profits in Asia reached $227 million, and $213 million in Latin America, Africa and the Middle East. The profit from worldwide automotive operations, including the loss in North America, was $618 million.

Profits from GM's financial services division, GMAC, added $139 million to net income.

The company offered a rather upbeat assessment for the rest of the year, noting that its cash flow had strengthened from 2006 and that it expected an infusion of $5.6 billion next quarter, when it finalizes the sale of its Allison Transmission business.

 

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