Second-quarter net income at GM drops 19% to $1.2 billion

Article by Anita Panait, on July 26, 2013

General Motors posted a 19-percent drop in net income in the second quarter of 2013 to $1.2 billion, despite logging higher net profits in its two biggest markets -- North America and China – and recording lower losses in Europe. The main culprits for the carmaker’s net profit decline in the second quarter of 2013 were weaker results in Southeast Asia and Australia, partly due to pricing pressure from the depreciating Japanese yen.

The net profit decline is also due to $200 million in one-time items. The carmaker, however, posted a 7-percent increase in earnings before interest and taxes (excluding nonrecurring items) to $2.3 billion. GM considers EBIT as the best measure of its results. The carmaker logged a 4-percent hike in revenues to $39.07 billion.

According to GM’s Chief Financial Officer, Dan Ammann, a lineup of model introductions planned for the second half of 2013 for the US should provide a "tailwind" for the carmaker’s North American unit, which accounts for a big part of its profits.

GM North America posted a 5-percent hike in pretax profit in the quarter to $2.0 billion. Amman said that GM is "moving right into the rich part of our launch cycle for a lot of our new products," including the continuation of the pickup introduction and pending launches of the redesigned Chevrolet Corvette and Cadillac CTS sedan. He said that these set GM up “very nicely for the second half of the year."

GM's bottom line, however, suffered from higher costs associated with those product launches, especially the pickup introduction that started in late May. These costs offset continued strong pricing in the US, according to Ammann.

The second-quarter results are GM's 14th quarterly profit in a row since emerging from bankruptcy in 2009. The carmaker has accumulated over $19 billion in profits since then. GM chief executive Dan Akerson remarked during a conference call with analysts that the influx of new and redesigned vehicles is driving the carmaker’s financial results. [source: GM]

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