"There's a high level of uncertainty out there," cautions GM CFO Dan Anmann.
A day after its stock took a drubbing – falling to the lowest level since last year’s IPO — General Motors Co. revealed it nearly doubled its second-quarter earnings as all of its global regions returned to the black.
The once-bankrupt maker had a net income of $2.5 billion, or $1.54 per share, an 89% improvement from the $1.3 billion, or 85 cents per share, earned during the same period a year ago. Chairman and chief executive officer Dan Akerson noted it was GM’s company’s sixth consecutive profitable quarter – and the third since IPO — as the company continued to recover from its bankruptcy two years ago.
“GM’s investments in fuel economy, design and quality are paying off around the world as our global market share growth and financial results bear out,” Akerson said. “Our progress has been steady and we’re preparing to launch more new products this year, including the Chevrolet Sonic in North America, the Opel/Vauxhall Zafira in Europe and the Baojun 630 in China to keep the momentum going.”
GM’s overall revenues increased 19%, or $6.2 billion to $39.4 billion, compared with the second quarter of 2010. Earnings before interest and tax, or EBIT, were $3 billion compared with $2 billion in the second quarter of 2010. There were no special items in either period.
Significantly, every region — including Europe — was in the black for the April – June quarter. In the home market, GM North America (GMNA) reported an EBIT-adjusted profit of $2.2 billion, an improvement of $0.6 billion compared with the second quarter of 2010.
Perhaps the biggest surprise came in Europe, where the maker has long struggled to turn its operations around, leading to persistent rumors – repeatedly denied by CEO Akerson – that the German-based Opel subsidiary is for sale.
GM Europe reported EBIT-adjusted of $100 million , an improvement of $300 million compared with the second quarter of 2010. In the second quarter of this year, GME incurred restructuring costs of approximately $100 million, which was approximately $200 million less than in the second quarter of 2010.
GM International Operations reported EBIT-adjusted of $600 million, up $100 million from the second quarter of 2010. GMIO earnings were buoyed by its continued success in China, where it remains the largest automaker.
GM ended the quarter with very strong total automotive liquidity of $39.7 billion. Automotive cash and marketable securities, including Canadian Health Care Trust restricted cash, was $33.8 billion compared with $30.6 billion at the end of the first quarter of 2011.
Based on the current industry outlook, the company expects that EBIT-adjusted earnings during the second half of 2011 will be modestly lower than in the first half and that its full-year 2011 EBIT-adjusted numbers will show solid improvement over 2010.
“Our earnings and cash flow are solid and we’re going to keep working on the fundamentals of strong brands, great products and operating leverage to create profitable growth around the world,” said Dan Ammann, senior vice president and CFO.
GM’s second-quarter profit was well above the Wall Street estimates, a poll by FactSet forecasting the maker would deliver earnings of $1.18 a share.
The early-morning announcement drove GM stock slightly higher but left it well short of recent levels. The maker was slammed by a sell-off this week, shares falling to a Tuesday low of $27.05. That was a full 20% off the initial strike price of $33 set when GM staged its Initial Public Offering last November – and a nearly one-third decline from the maker’s January peak of $39.48.
But investors remain worried about a variety of factors, including the spring slowdown in U.S. car sales.
CFO Anmann acknowledged those worries when he acknowledged, “There’ a high level of uncertainty out there.”
Virtually all the major global automakers have now reported for the April-June quarter and the results have varied widely. Volkswagen tripled year-ago results but Toyota, hard hit by the March 11 earthquake and tsunami in Japan, saw its earnings tumble by 99%.