Shareholders who held on through General Motors Corp.'s recent stock slump — the price plunged from about $80 in the spring to a 2-year low of $57 in late June — were rewarded last week when the automaker announced record earnings of $2.93 per share on profits of $1.75 billion.

The second quarter results compare with net income of $1.73 billion and $2.66 per share in like-1999, the previous record for the period. While the tally beat analysts' forecasts, investors didn't rush to GM. The stock price climbed just 44 cents the day (July 18) financial results were released. “It's disappointing,” admits GM Chief Financial Officer J. Michael Losh. “I think it (GM stock) is over sold.”

GM Second Quarter
Financial Results
2000 1999 % Chg.
Sales $48,743 $45,067 8.2
Net Income $1,751 $1,734 0.0
E/S $2.93 $2.66 10.2
Unit Sales* 2,322 2,358 -1.5
Note: Dollar sales and net income stated in millions; unit sales in thousands.
E/S is earnings per share.
*Unit sales are worldwide wholesale deliveries.

Revenues rose to $48.74 billion from $45.06 billion year-ago. The results were mixed at GM's four automotive sectors. “Things came in pretty close to expectations. North America was expected to carry the lion's share of the profits and it did,” says Mr. Losh. “A pleasant surprise was South America.”

In North America, income decreased 4.9% to $1.41 billion from $1.48 billion in like-1999. GM says the slight decline primarily was due to investments in future product programs and e-commerce initiatives, not increasing pricing pressures — though some analysts think otherwise and estimate the automaker spent an average of $2,000-plus on each vehicle sold in the U.S. The flop of Saturn's L-Series also affected GM more than it had planned.

Income also dropped at GM Europe from $187 million year-ago to $166 million. A slow German market offset strong showings in Turkey, Spain, Ireland and Portugal.

Losses grew in the Asia/Pacific from $81 million in like-1999 to $123 million. GM affiliate Isuzu Motors Ltd. reportedly accounted for about $100 million of that total. While Japan continues to be mired in a slowdown, the remaining countries in the region “are coming back together,” says Mr. Losh, adding that GM's Holden unit in Australia “continues to go great guns.”

GM Latin America/Africa/Middle East reported a second quarter income of $10 million, its third consecutive profitable quarter and up from a loss of $38 million year-ago. Brazil is driving GM's comeback, Mr. Losh says, while Argentina is “the biggest problem. It's a tough place to manufacture.”

GM's 3.6% profit margin missed its 5% goal. The automaker also fell short of its 15% return on net assets target. The RONA for April-June was 13.1%, up from year-ago's 11.2%.