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General Motors' profit falls 41%, hurt by Europe's economic woes

GM attributes a 4% drop in second-quarter revenue to the strengthening of the U.S. dollar against other currencies. Its North American operating profit also falls.

August 03, 2012|By Jerry Hirsch, Los Angeles Times
  • Through the first seven months of this year, GM's overall U.S. sales have grown less than 3%, to 1.5 million vehicles, compared with a year earlier, according to Autodata Corp. That slow growth comes in a period when the overall industry grew 14%. Above, Chevrolets and Cadillacs sit at a GM dealership Aug. 1 in Peoria, Ill.
Through the first seven months of this year, GM's overall U.S. sales… (Daniel Acker, Bloomberg )

Europe's financial crisis roiled General Motors' profit, which sank 41% as sales plunged in debt-burdened nations such as Greece, Portugal and Italy in the second quarter.

The automaker continues to chug along in the U.S., though there were signs of slowing for the nation's biggest auto seller.

GM said it earned $1.5 billion in the second quarter, down from $2.5 billion in the same period a year earlier. Revenue fell 4% to $37.6 billion. The company attributed the decline to the 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 head winds 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.

GM's shares fell 52 cents, or 2.6%, to $19.14. Its stock has fallen 42% since the company's 2010 post-bankruptcy offering price. Taxpayers still own about a third of the company after 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 profit 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.

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

GM's market share also is sliding. Its share of the U.S. market dropped to 18% this year through July, down 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 profit in the quarter. The company earned $557 million there, down slightly from $573 million a year earlier.

The deepening economic slump and debt crisis in Europe weighed on GM's earnings. It lost $361 million in the region. A year earlier, it earned $102 million in Europe. The automaker's South America operation swung to a loss of $19 million from a profit of $57 million 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." He promised changes that would improve the results.

jerry.hirsch@latimes.com

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