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Business Title: GM Net Income Doubles on U.S. Sales General Motors Co. (GM), the largest U.S. automaker, said second-quarter profit almost doubled on rising U.S. sales of vehicles ranging from the compact Chevrolet Cruze to full-size Silverado pickups. Profit climbed to $2.52 billion, or $1.54 a share, from $1.33 billion, or 85 cents, a year earlier, Detroit-based GM said today in a statement, topping the $1.20 a share average estimate of 13 analysts surveyed by Bloomberg. Sales rose 19 percent to $39.4 billion. GM’s profit rose as its U.S. sales increased 11 percent. The Cruze was the top-selling car in the market in June and the Silverado remained the second-most popular vehicle, behind only Ford Motor Co. (F)’s F-Series line. Higher prices added $1 billion in earnings before interest and taxes, with half of that coming in North America, company Chief Finance Officer Dan Ammann said. “It’s a solid quarter,” Ammann said in an interview. “We had good revenue growth and good earnings growth. We were profitable in every region of the world. That’s an important first for us.” Net income was $2.99 billion, GM said. GM’s U.S. sales climbed to 669,065 light vehicles in the second quarter, according to Autodata Corp., a researcher based in Woodcliff Lake, New Jersey. GM gained market share after Toyota Motor Corp. (7203) and Honda Motor Co. lost production because of the March earthquake and tsunami in Japan. Truck Inventory GM boosted profits by adding to truck inventories in the quarter. GM has 115 days’ supply of pickups -- one of the company’s most profitable vehicles -- compared with 67 days worth of pickups held by rival Ford. Automakers record revenue when vehicles are shipped to dealers. Ammann said that building up truck inventory added about $350 million to GM’s bottom line. If inventories grow, GM could have to cut production, Ammann said. “We’re going to watch the supply-and-demand equation very closely,” he said on Bloomberg Television’s “InsideTrack” with Erik Schatzker. “The main lever that we will use should demand weaken is that we’ll modulate production. We don’t intend to lead with incentives.” GM said it has normal capacity in its three full-size pickup plants of about 780,000 units. Those plants will only be able to make about 640,000 units next year, when the automaker has said it will idle factories to convert them for output of its next-generation trucks. North America Progress The automaker earned $2.25 billion in North America before interest and taxes, up 41 percent from a year ago. Analysts were watching those results, because rising costs in the first quarter undercut the company’s progress in its home market. GM kept costs in control and got much better pricing, which is why the automaker beat earnings expectations by so much, said Peter Nesvold, a New York-based analyst with Jefferies & Co. For the quarter, GM’s operating income rose 29 percent. In the first quarter, rising costs eroded the profit from boosting sales. “We were anticipating that pricing would be better,” Nesvold said in a telephone interview. “It was even better than we imagined.” GM said the Cruze is selling for $4,200 more on average than the Chevrolet Cobalt car that it replaced. Buyers are paying $7,000 more for the refreshed Buick LaCrosse sedan and $3,800 more for the Chevrolet Equinox sport-utility vehicle, compared with 2009 average prices. Pricing Outlook Reaction to GM’s earnings will depend on whether investors believe the pricing gains will continue, Nesvold said. If they believe that the improvements are because of the temporary inventory shortage among Japanese automakers after the March earthquake then the reaction to GM’s surprisingly strong earnings could be muted, he said. “That will be the big debate,” Nesvold said. “Are these pricing gains sustainable in the second half of the year?” GM said adjusted earnings before interest and taxes in the second half may be lower than the first six months. Full-year Ebit will “show solid improvement” from 2010, GM said. In Europe, GM earned $102 million before taxes and interest. The company’s international operations unit, which includes China, made $573 million, and the company made $57 million in South America. Treasury Stake The U.S. Treasury Department, which owns 33 percent of GM, plans to evaluate the earnings and the market’s reaction before deciding whether to sell more of its investment, a person familiar with the matter said last month. The department wants to sell its stake for at least the IPO price of $33 a share and would prefer to sell in the high-$30 range, a person familiar with the matter has said. GM shares fell 78 cents, or 2.9 percent, to $26.39 at 10:22 a.m. in New York Stock Exchange composite trading. GM gained 12 cents yesterday to $27.17, a day after its lowest closing price since the IPO in November. The U.S. took a 61 percent ownership of GM as part of the automaker’s government-led bailout and bankruptcy reorganization in 2009. The Treasury sold shares equal to a 28 percent stake in the IPO. Some investors are wary of getting back in until auto sales improve and Treasury sells some stock, said Itay Michaeli, an analyst with Citi Capital Markets. U.S. deliveries ran at a seasonally adjust annual rate of more than 12 million for seven months before slowing in May and June. GM’s automotive operations had $33.8 billion in cash as of June 30, from $30.6 billion at the end of the first quarter. The automaker has reduced debt to $4.7 billion from $8.2 billion a year earlier. General Motors Financial Co., GM’s finance unit, helped more than double the automaker’s share of U.S. sales to lease customers to 13 percent in the second quarter, from 6.5 percent a year earlier. Deliveries to subprime buyers were 6.8 percent of sales in the quarter, up from 4.9 percent.
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#1. To: Brian S (#0)
Lease and Inventory stuffing... subprime buyers....Sweet Baby hesus...8D
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