General Motors has recorded second quarter net income of USD$1.1-billion. That’s a colossal amount of money, but even more so when you remember that this same company, just four years ago, had to turn to the US government for bail-out cash in the face of a massive sales and profit collapse.
GM says that it has made this profit chiefly from record operating profits in North America and, somewhat unusually, keeping ahead of the game in China. Recent turmoil on the Chinese stock exchange, coupled with exhortations from the ruling Communist party not to buy overly flashy or ostentatious cars, has put the kibosh on many a western car makers’ China ambitions for 2015, but GM seems immune for the moment.
Its position has been further strengthened by, if not quite a rebound, then at least a touch more bounciness in Europe. In the same period last year, primarily through Opel, GM lost USD$300-million in Europe, but it managed to lose ‘just’ USD$45-million in the same period this year. That’s the budget for a pretty big Hollywood movie, but losing that still represents success for GM, especially as much of it is coming from Opel being apparently able to command slightly higher prices for its cars, and rely less on discounting. It also follows on from a disastrous first quarter of the year in which GM and Opel pretty much shut down their Russian operations, because of that nation’s plunging car sales thanks to sanctions imposed by the EU and US over Ukraine.GM spent USD$354-million in reducing its Russian operations and putting its St Petersburg factory partially into mothballs.
Opel CEO Karl-Thomas Neumann hailed the results as a major turnabout for Opel but still advised caution on Opel’s outlook. In a letter to Opel’s employees he said that “Our plan to return to profitability in the course of the next year remains very ambitious. It certainly will not be a walk in the park. We need to compensate for the volume of sales that we lost in other markets. This means that we will not be able to grow as fast as initially targeted.”
In a statement, GM’s CEO, Mary Barra said that “The first two quarters of the year were strong as we fully capitalised on a robust North American industry and maintained our strength in China, despite the challenging conditions in that market. We said our goal was to improve our earnings and margins this year, and we are on plan.”