Aug 02, 2012

GM earns $1.5 billion in quarter despite Europe loss

By James R. Healey, USA TODAY
Updated 1h 2m ago

General Motors overcame a big loss in Europe to post a second-quarter profit of $1.5 billion on strong North American earnings. That was a drop of 41% from a year ago, but overall was better than Wall Street had expected.The automaker said its revenue also slipped, to $37.6 billion from $39.4 billion a year earlier. GM said that was "due almost entirely to the strengthening of the U.S. dollar versus other major 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 GM CEO Dan Akerson. "Despite the challenging environment, GM has now achieved 10 consecutive quarters of profitability, which is a milestone the company has not achieved in more than a decade."

GM's pre-tax earnings:

  • In North America: $2 billion in pretax second-quarter profit, down from $2.2 billion last year.
  • Europe: $361 million loss, vs. year-ago profit of $102 million.
  • South America: Break-even, vs. year-ago profit of $100 million.


European operations -- mainly the company's Opel brand -- are in turmoil.
GM CEO Dan Akerson said in a conference call with investment analysts following the earnings announcement:
"In the past we haven't moved fast enough to fix the things we could control. But that's changed,"

Last week, GM dismissed designer Dave Lyon a few days before he was to take over as Opel design chief, saying he had violated an unspecified GM policy. Then, over the weekend, the car company axed global marketing chief Joel Ewanick for unspecified reasons.
Officially, Ewanick, like Lyon, resigned. But GM said in an unusually harsh send-off that Ewanick "failed to meet expectations the company has of its employees." You can read more here and a follow-up item is here.

Ewanick recently had crafted a high-dollar sponsorship deal -- estimates ranged from $300 million to $600 million -- with U.K. soccer team Manchester United. A new deal, expected to cost GM only a few tens of millions a year, was announced almost immediately after Ewanick left GM, suggesting Ewanick's arrangement was rejected by GM, but it's unclear whether, and how much, that contributed to his ouster.

Karl-Friedrich Stracke, the GM exec in charge of Opel since April 2011 and head of GM's European operations just since Jan. 1, was shouldered aside three weeks ago and replaced in both those jobs by Steve Girsky, GM vice chairman and the automaker's troubleshooter. Here's an account of that, which also details GM's European troubles.

A few days later, the Opel board tapped Thomas Sedran, vice-chairman of the board, to act as temporary chairman. At that time, Girsky said: "We will continue to implement our business plan as it was outlined and work to improve it. We will further reduce bureaucracy and continue to challenge the corporate culture."

GM earns $1.5 billion in quarter despite Europe loss