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Sputtering GM records 41% decline in Q2 profit
DETROIT -- The engine that powers General Motors is running rough. And if the company doesn't tune it up soon, GM's comeback from bankruptcy is in danger of stalling.
The Detroit automaker said Thursday its second-quarter net profit fell 41 per cent on a big loss in Europe. And there are signs North America, GM's main income source, also is slowing. Profits there have fallen for two straight quarters, the first time that's happened since the company left bankruptcy in 2009.
The results are another sign that the U.S. auto industry, a bright spot in the economy for two years, is heading into a rough patch.
GM's profit from April through June dropped to $1.5 billion, $1 billion less than the same quarter a year earlier. It had a $361-million pre-tax loss in Europe and $19 million of red ink in South America. In North America, pre-tax profits fell nearly 13 per cent to about $2 billion. International profits, including Asia, also dropped, by three per cent to $557 million.
The company is predicting lower third-quarter profits in North America as it incurs manufacturing and advertising costs for new models. Also troubling was GM's market share. It fell in all four of the company's regions, including nearly a two-point drop in the U.S. to 18.2 per cent.
CEO Dan Akerson told analysts GM's performance was worse than last year in most key areas.
"That's not acceptable with this leadership team, and we're going to underscore that fact with our teams to keep everyone on point," he said.
The company's shares dropped 52 cents, or 2.6 per cent, to $19.14.
GM isn't the only automaker with European troubles or slowing growth in North America. Last week, Ford reported its second-quarter net income fell 57 per cent, largely because of a loss in Europe. And Chrysler's U.S. sales growth has started waning. Sales were up 13 per cent in July over last year, but they grew more than 30 per cent during the first six months.
"North American growth is going to slow a bit and will hit the auto manufacturers," said Bill Selesky, an auto industry analyst with Argus Research, who predicts a rebound early next year.
Akerson and other GM executives say they're in the process of fixing the company's problems.
-- The Associated Press
Republished from the Winnipeg Free Press print edition August 3, 2012 B4
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