July 21, 2016 01:23 PM
DETROIT (AP) — General Motors' second-quarter profit more than doubled to a post-bankruptcy record $2.87 billion on a strong performance in the U.S., where the company saw sales fall after it cut low-profit sales to rental car companies. It raised its earnings guidance for the year.
Its shares edged up in midday trading.
The company earned a record $3.6 billion pretax profit in North America, made $500 million on its joint venture in China and even eked out a $137 million profit in Europe, its first five years. But it lost money in South America due to economic woes and profits were nearly halved in international operations due to struggles in the Middle East.
Yet GM sees the good times continuing in the U.S., its main profit center, even though sales fell 4.4 percent during the first half of the year and its market share dropped a full percentage point to 16.6 percent, the lowest level since at least 1980.
Chief Financial Officer Chuck Stevens said the company's retail sales to individual buyers were up due to strong demand for high-profit pickup trucks and SUVs, plus the impact of redesigned vehicles such as the Chevrolet Malibu and Cruze sedans and the Cadillac XT5 SUV.
"Our focus is to drive profitable retail share," Stevens said. "I think the results speak for themselves."
The profit was so strong that GM raised its full-year earnings per share guidance by 25 cents to $5.50 to $6. Investors agreed. GM's stock rose 47 cents, or 1.5 percent, to $31.96 in midday trading Thursday.
GM cautioned that the European profit probably wouldn't hold through the second half due largely to Britain's vote to exit the European Union. The company predicted that damage to the British Pound and uncertainty in Europe would cost GM up to $400 million during the next six months.
Stevens said the company would take actions to mitigate the impact, including a change in GM's European manufacturing footprint.
The company also revealed that it spent $581 million during the quarter — half in cash and half in GM stock — to buy Cruise Automation, a 40-person software company that is testing autonomous vehicles on the streets of San Francisco.
The Detroit automaker said it earned $1.81 per share from April through June. Excluding special items, it made $1.86, shattering Wall Street forecasts. Analysts polled by FactSet expected $1.52 per share. Revenue rose 11 percent to $42.4 billion.
GM was optimistic about the second half of the year despite troubles in Britain and increased incentive spending in the U.S.
Early in July, GM's average spending on rebates and other discounts rose by about $1,800 to $6,125 per vehicle, according to J.D. Power data obtained by The Associated Press. Incentives on the Chevrolet Silverado pickup truck rose 37 percent from July 2015 to nearly $8,000.
But Stevens said the increase was a temporary move to sell down outgoing 2016 models to prepare for 2017s. During the first half, GM spent less than the industry on discounts, he said.
By TOM KRISHER
Updated: July 21, 2016 01:23 PM
(Copyright 2016 by The Associated Press. All Rights Reserved.)