CEO Dan Akerson expresses confidence in the auto maker’s European turnaround plan and says recent management moves, including some high-profile dismissals, indicate there will be no hesitation to act if a change is required.
GM CEO Dan Akerson: “We are relentless in attacking issues.”
continues on its recovery and growth track, top executives say, downplaying worries over continued losses in Europe, recent management turmoil, shrinking profits and declining market share in the U.S. and worldwide.
The latest earnings results reported today reflect “a number of realities about our business, the competitive landscape and the global economy,” CEO Dan Akerson, says in a conference call with financial analysts. “(But) in a tough environment, we have profitable year-to-dates in four out of our five segments, which reflect a strong diversification of our earnings base.”
Chief Financial Officer Dan Ammann calls Q2 “a solidly profitable quarter,” pointing out improvements under way to fundamentals in South America and the auto maker’s overall strengthening balance sheet. “We are relentless in attacking issues affecting us around the world.”
Recent management moves, including dismissals of the auto maker’s global marketing chief and a top designer, reassignment of the top executive at its Adam Opel arm and recruitment of outsiders to help run European operations, were necessary actions that will strengthen the auto maker, Akerson says.
“In recent weeks, you’ve seen that we would not hesitate to act if a change is required to make the business stronger,” he says. “From time to time it will mean parting company with people who are not delivering expected results or, alternatively, do not meet the highest standards of accountability and integrity.
“That’s the way it has to be for all of us in order for the company to reach its full potential.”
GM eked out better-than-expected earnings in the quarter, netting $1.5 billion ($0.90 per fully diluted share) on revenues of $37.6 billion. That compares with $2.5 billion in net income on $39.4 billion in revenue year-ago.
Akerson says the revenue shortfall from like-2011 almost entirely reflects exchange-rate losses due to the strengthening of the dollar against the euro and other currencies.
Dragging the auto maker down was Europe and, to a less extent, South America.
GM Europe reported an EBIT-adjusted (earnings before interest and taxes) loss of $361 million, down from a profit of $102 million in like-2011 but a better result than some analysts predicted.
The market environment in Europe is expected to remain difficult, but GM does see some near-term cost-cutting opportunities.
“In the past, we haven’t moved fast enough (in Europe) to fix the things we could control, but that’s changed,” Akerson assures, adding recent success in recruiting new members of the Opel executive team indicates there’s a general confidence in the turnaround plan and potential for the German arm to succeed.
South America ran near breakeven, losing $19 million, including a $100 million charge for restructuring, a drop from its $57 million profit year-ago.
The restructuring cost will go to shift some production outside of high-cost regions within Brazil to lower-cost sectors, executives say, declining to specify what actions will be taken. GM estimates its manufacturing costs are $300 million-$400 million higher than its competitors’ costs in Brazil.
Overall, GM posted a $600 million EBIT-adjusted profit on its international operations, even with like-2011.
That left North American operations to carry the biggest chunk of the earnings ball, where EBIT-adjusted income totaled $2.0 billion, down slightly from the $2.2 billion in black ink recorded a year ago.
The North American performance was stronger than expected, in part because GM pushed some planned spending into the third quarter. That may drag Q3 down below initial forecasts, but the auto maker says it believes the second- and third-quarter results will be consistent with Q1, keeping it on track with the expectations it set earlier in the year.
GM’s liquidity improved markedly to $38.5 billion, up from $31.5 billion at the end of the first quarter.
Vehicle production totaled 2,393,000 units in Q2, on par with year-ago’s 2,400,000. Through the first six months, output reached 4,816,000 vehicles, up from 4,727,000 in January-June 2011.
Global vehicle sales hit 2,391,000 during the quarter, slightly ahead of 2,320,000 year-ago. All major regions were up except Europe, down 7.0%, and South America, off 7.3%.
GM says its global market share slipped to 11.6% in the quarter, from 12.3% in like-2011.