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GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — Recall expenses chopped $1.5 billion from General Motors’ bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside funds to compensate victims of small-car crashes.

The nation’s biggest automaker posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations, according to data provider FactSet.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record of 11.8 million in 2004.

GM’s safety problems began earlier this year with the recall of 2.6 million small cars with faulty ignition switches. The company knew about the problem for more than 10 years before finally recalling the cars this year. GM says at least 13 people have died in crashes caused by the switches, although lawmakers say the total is closer to 100.

GM set aside $400 million to fund a compensation plan for families of those killed and people injured in crashes caused by the switches. It’s being administered by compensation expert Kenneth Feinberg.

Chief Financial Officer Chuck Stevens said the figure could go as high as $600 million. He said there is no cap on the size of the fund.

“At the end of the day, the ultimate cost of this will be determined by Ken Feinberg,” Stevens said.

Lawyers suing the company called the $400 million figure arbitrary and too small. Montgomery, Ala., lawyer Jere Beasley said the number is “not consistent with a no-cap compensation fund.”

GM has announced a total of 60 recalls so far this year. CEO Mary Barra told analysts on a conference call Thursday that a companywide review of safety issues is “substantially complete.”

So far, company sales have been “resilient” in the face of the recalls, and GM has even benefited in one way. Stevens said GM has sold about 6,600 cars by offering employee pricing to owners of recalled small cars such as the Chevrolet Cobalt and Saturn Ion. The company also is working with dealers to show new cars and trucks to owners of recalled vehicles.

“We see this as an opportunity to demonstrate the strength of the products that we have today,” Barra said.

For the quarter, GM’s revenue was up 1.3 percent for the quarter to $39.6 billion, about $300 million below analysts’ estimates.

GM reported a $1.4 billion pretax profit in North America, led by higher prices for pickup trucks and new large SUVs. Still, that was down almost 30 percent from a year ago. But excluding recall costs, GM would have made $2.4 billion in North America, the highest number since January of 2010, Stevens said.

Pretax profits rose 36 percent at GM’s International Operations including China, to $315 million. But South America reported an $81 million loss, and GM’s European loss widened by almost $200 million to $305 million on uncertainty in Russia.

Stevens said the situation with Ukraine has forced GM to cut production by 20 to 25 percent at its plant in St. Petersburg. He expects more of the same in the second half.

Despite the challenges, GM now says it expects to be profitable in Europe by mid-decade, anticipating improvement in core markets such as Germany and the United Kingdom.

GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — Recall expenses chopped $1.5 billion from General Motors’ bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside funds to compensate victims of small-car crashes.

The nation’s biggest automaker posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations, according to data provider FactSet.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record of 11.8 million in 2004.

GM’s safety problems began earlier this year with the recall of 2.6 million small cars with faulty ignition switches. The company knew about the problem for more than 10 years before finally recalling the cars this year. GM says at least 13 people have died in crashes caused by the switches, although lawmakers say the total is closer to 100.

GM set aside $400 million to fund a compensation plan for families of those killed and people injured in crashes caused by the switches. It’s being administered by compensation expert Kenneth Feinberg.

Chief Financial Officer Chuck Stevens said the figure could go as high as $600 million. He said there is no cap on the size of the fund.

“At the end of the day, the ultimate cost of this will be determined by Ken Feinberg,” Stevens said.

Lawyers suing the company called the $400 million figure arbitrary and too small. Montgomery, Ala., lawyer Jere Beasley said the number is “not consistent with a no-cap compensation fund.”

GM has announced a total of 60 recalls so far this year. CEO Mary Barra told analysts on a conference call Thursday that a companywide review of safety issues is “substantially complete.”

So far, company sales have been “resilient” in the face of the recalls, and GM has even benefited in one way. Stevens said GM has sold about 6,600 cars by offering employee pricing to owners of recalled small cars such as the Chevrolet Cobalt and Saturn Ion. The company also is working with dealers to show new cars and trucks to owners of recalled vehicles.

“We see this as an opportunity to demonstrate the strength of the products that we have today,” Barra said.

For the quarter, GM’s revenue was up 1.3 percent for the quarter to $39.6 billion, about $300 million below analysts’ estimates.

GM reported a $1.4 billion pretax profit in North America, led by higher prices for pickup trucks and new large SUVs. Still, that was down almost 30 percent from a year ago. But excluding recall costs, GM would have made $2.4 billion in North America, the highest number since January of 2010, Stevens said.

Pretax profits rose 36 percent at GM’s International Operations including China, to $315 million. But South America reported an $81 million loss, and GM’s European loss widened by almost $200 million to $305 million on uncertainty in Russia.

Stevens said the situation with Ukraine has forced GM to cut production by 20 to 25 percent at its plant in St. Petersburg. He expects more of the same in the second half.

Despite the challenges, GM now says it expects to be profitable in Europe by mid-decade, anticipating improvement in core markets such as Germany and the United Kingdom.

GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — Recall expenses chopped $1.5 billion from General Motors’ bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside funds to compensate victims of small-car crashes.

The nation’s biggest automaker posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations, according to data provider FactSet.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record of 11.8 million in 2004.

GM’s safety problems began earlier this year with the recall of 2.6 million small cars with faulty ignition switches. The company knew about the problem for more than 10 years before finally recalling the cars this year. GM says at least 13 people have died in crashes caused by the switches, although lawmakers say the total is closer to 100.

GM set aside $400 million to fund a compensation plan for families of those killed and people injured in crashes caused by the switches. It’s being administered by compensation expert Kenneth Feinberg.

Chief Financial Officer Chuck Stevens said the figure could go as high as $600 million. He said there is no cap on the size of the fund.

“At the end of the day, the ultimate cost of this will be determined by Ken Feinberg,” Stevens said.

Lawyers suing the company called the $400 million figure arbitrary and too small. Montgomery, Ala., lawyer Jere Beasley said the number is “not consistent with a no-cap compensation fund.”

GM has announced a total of 60 recalls so far this year. CEO Mary Barra told analysts on a conference call Thursday that a companywide review of safety issues is “substantially complete.”

So far, company sales have been “resilient” in the face of the recalls, and GM has even benefited in one way. Stevens said GM has sold about 6,600 cars by offering employee pricing to owners of recalled small cars such as the Chevrolet Cobalt and Saturn Ion. The company also is working with dealers to show new cars and trucks to owners of recalled vehicles.

“We see this as an opportunity to demonstrate the strength of the products that we have today,” Barra said.

For the quarter, GM’s revenue was up 1.3 percent for the quarter to $39.6 billion, about $300 million below analysts’ estimates.

GM reported a $1.4 billion pretax profit in North America, led by higher prices for pickup trucks and new large SUVs. Still, that was down almost 30 percent from a year ago. But excluding recall costs, GM would have made $2.4 billion in North America, the highest number since January of 2010, Stevens said.

Pretax profits rose 36 percent at GM’s International Operations including China, to $315 million. But South America reported an $81 million loss, and GM’s European loss widened by almost $200 million to $305 million on uncertainty in Russia.

Stevens said the situation with Ukraine has forced GM to cut production by 20 to 25 percent at its plant in St. Petersburg. He expects more of the same in the second half.

Despite the challenges, GM now says it expects to be profitable in Europe by mid-decade, anticipating improvement in core markets such as Germany and the United Kingdom.

GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — Recall expenses chopped $1.5 billion from General Motors’ bottom line in the second quarter, as it added up the costs of repairs for nearly 30 million cars and set aside funds to compensate victims of small-car crashes.

The automaker, which is in the midst of the largest spate of recalls in its history, posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations, according to data provider FactSet.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record.

GM took two pretax charges tied to the recalls: $400 million to compensate victims of ignition-switch related crashes and $874 million to account for recall expenses during the next 10 years. It also booked $1.2 billion in expenses for recalls announced during the quarter. The after-tax impact of those items was $1.5 billion.

GM’s safety problems began earlier this year with the recall of 2.6 million small cars with faulty ignition switches. The company has admitted knowing about the problem for more than 10 years, yet it didn’t issue any recalls until now. GM says at least 13 people have died in crashes caused by the switches, although lawmakers say the total is closer to 100.

The $400 million will fund a compensation plan for families of those killed and people injured in crashes caused by the switches. It’s being administered by compensation expert Kenneth Feinberg.

Chief Financial Officer Chuck Stevens said the figure is an estimated total cost based on outside actuarial calculations, but it could go as high as $600 million. He said there is no cap on the size of the fund.

“At the end of the day, the ultimate cost of this will be determined by Ken Feinberg,” Stevens said.

GM has “substantially cleared” a companywide safety review that looked for lingering unaddressed problems, Stevens said. GM has announced 60 recalls totaling just under 30 million vehicles so far this year. Stevens expects that going forward, GM will spend slightly more on recalls than normal. As a comparison, the company spent $100 million on recalls in North America in the second quarter of last year.

So far, company sales haven’t been severely hurt by the recalls. In one way, they’ve benefited. Stevens said GM has sold about 6,600 cars by offering employee pricing to owners of recalled small cars such as the Chevrolet Cobalt and Saturn Ion.

Revenue was up 1.3 percent for the quarter to $39.6 billion, about $300 million below analysts’ estimates.

Stevens said GM’s core business, led by North America and China, performed well during the quarter. Without recall expenses, he said, the company would have made $1.02 per share. The company reported a $1.4 billion pretax profit in North America, led by higher prices for pickup trucks and new large SUVs. Still, that was down almost 30 percent from a year ago. But excluding recall costs, GM would have made $2.4 billion in North America, the highest number since January of 2010, Stevens said.

Pretax profits were up 36 percent at GM’s International Operations including China, to $315 million. But South America reported an $81 million loss, and GM’s European loss widened by almost $200 million to $305 million on uncertainty in Russia. The company also had $200 million in restructuring costs associated with the pending closure of a factory in Bochum, Germany.

Stevens said the situation with Ukraine has forced GM to cut production by 20 to 25 percent at its plant in St. Petersburg. He expects more of the same in the second half. Excluding those costs, GM is on track to break even and become profitable in Europe by mid-decade.

GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — Recall costs chopped $1.5 billion from General Motors’ bottom line in the second quarter, cutting its net income by 85 percent.

The automaker, which is in the midst of the worst recall crisis in its history, posted a net profit of $190 million, or 11 cents per share. A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations.

So far this year GM has recalled almost 30 million vehicles, surpassing the company’s annual record.

GM took two pretax charges tied to the recalls: $400 million to compensate victims of ignition-switch related crashes and $874 million to account for recall expenses during the next 10 years. It also booked $1.2 billion in expenses for recalls announced during the quarter. The after-tax impact of those items was $1.5 billion.

GM’s safety problems began earlier this year with the recall of 2.6 million small cars with faulty ignition switches. The company has admitted knowing about the problem for more than 10 years, yet it didn’t issue any recalls until now. GM says at least 13 people have died in crashes caused by the switches, although lawmakers say the total is closer to 100.

The $400 million will fund a compensation plan for families of those killed and people injured in crashes caused by the switches. It’s being administered by compensation expert Kenneth Feinberg.

Chief Financial Officer Chuck Stevens said the figure is an estimated total cost based on outside actuarial calculations, but it could go as high as $600 million.

“At the end of the day, the ultimate cost of this will be determined by Ken Feinberg,” Stevens said.

GM has “substantially cleared” a companywide safety review that looked for lingering unaddressed problems, Stevens said. GM has announced 60 recalls totaling just under 30 million vehicles so far this year. Stevens expects that going forward, GM will spend slightly more on recalls than normal.

So far, company sales haven’t been severely hurt by the recalls. In one way, they’ve benefited. Stevens said GM has sold about 6,600 cars by offering employee pricing to owners of recalled small cars such as the Chevrolet Cobalt and Saturn Ion.

Stevens said GM’s core business, led by North America and China, performed well during the quarter. Without recall expenses, he said, the company would have made $1.02 per share. The company reported a $1.4 billion pretax profit in North America, led by higher prices for pickup trucks and new large SUVs. Still, that was down almost 30 percent from a year ago.

Pretax profits were up 36 percent at GM’s International Operations including China, to $315 million. But South America reported an $81 million loss, and GM’s European loss widened by almost $200 million to $305 million on uncertainty in Russia.

Stevens said the situation with Ukraine has forced GM to cut production by 20 to 25 percent at its plant in St. Petersburg. He expects more of the same in the second half. Excluding those costs, GM is on track to break even and become profitable in Europe by mid-decade.

GM profit 2Q falls 85 pct. on recall costs

KDWN

DETROIT (AP) — General Motors says second-quarter profit fell 85 percent as recall costs chopped $1.5 billion from the bottom line.

The automaker posted a net profit of $190 million, or 11 cents per share, including restructuring and recall-related expenses. A year ago GM made $1.26 billion, or 75 cents per share.

Without one-time items GM would have made 58 cents per share, equaling Wall Street’s expectations.

So far this year GM has recalled almost 30 million vehicles, a company record.

GM took a number of pretax charges tied to the recalls. They Include $400 million to compensate victims of ignition-switch related crashes; $874 million to account for recall expenses during the next 10 years; and $1.2 billion for recalls announced during the quarter. The after-tax impact of those items was $1.5 billion.