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General Motors profit slides as automaker piles up European losses

August 02, 2012|By Jerry Hirsch
  • General Motors Chairman and CEO Daniel Akerson addresses shareholders at the company's annual shareholder meeting in Detroit.
General Motors Chairman and CEO Daniel Akerson addresses shareholders… (Associated Press )

General Motors Co. profits fell 41% as the automaker piled up losses in Europe and earned less money in the U.S.

GM said it earned $1.5 billion in the second quarter, down from $2.5 billion in the same period a year earlier. Revenue dipped 4% to $37.6 billion. The company attributed the decline to strengthening of the U.S. dollar against other currencies.

"Our results in North America, our international operations and at GM Financial were solid but we clearly have more work to do to offset the headwinds we face, especially in regions like Europe and South America," said Dan Akerson, GM's chief executive.

He noted that despite the challenging economic environment, GM has logged 10 consecutive profitable quarters, something it has not accomplished in more than a decade.

In morning trading on Wall Street, GM's shares were unchanged at $19.66. Its stock has fallen 40% since the company's 2010 post-bankruptcy offering price. Taxpayers still own about a third of the company following its federal bailout and bankruptcy restructuring.

North America was by far GM’s best region, but it also showed some slowing. The company’s operating profits in the region slipped 13% to just under $2 billion. 

The latest U.S. auto sales data highlight the challenges the nation's largest vehicle manufacturer faces in the coming months.

GM's overall U.S. sales have grown less than 3% to 1.5 million vehicles through the first seven months of this year, compared with the same period a year earlier, according to Autodata Corp.  That slow growth comes in a time period when the overall industry grew 14%.

GM's market share also is sliding. Its share of the U.S. market dipped to 18% year-to-date, down almost 2 percentage points from 20% in the same period last year, Autodata said.

Still, Akerson said he remains upbeat about the region's prospects.

"GM North America is a powerful earnings engine with the potential to become even stronger," he said. 

Asia -- where GM has extensive sales in China -- also remained an important source of profits. The company earned $557 million there, down slightly from $573 million a year ago.

The deepening economic slump and debt crisis in Europe weighed on GM’s earnings. It lost $361 million in the region. A year ago, it earned $102 million in Europe. South America swung to a loss of $19 million from a profit of $57 million in the same quarter a year earlier.

In announcing the automaker’s financial results, Akerson addressed what he called the "leadership" issue at the company.

On Sunday, GM abruptly fired its top marketing chief, the latest in a flurry of management shake-ups.

He said the recent firings and departures signaled that the company would not hesitate to make changes when people were failing to live up to their job expectations.

The departure of marketing chief Joel Ewanick, an industry veteran, came days after Dave Lyon, GM's interior-design chief in North America and a global brand liaison, left the company.

Akerson also removed Karl-Friedrich Stracke as head of GM's Opel brand and its troubled European operations last month.

“This was a solidly profitable quarter for General Motors particularly in North America and Asia,” Akerson said, but he acknowledged that “most of our key metrics were unfavorable compared with a year ago. That’s not acceptable with this leadership team” and he promised changes that would improve the results. 

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