Trucks give GM earnings increase in second quarter
A fresh lineup of pickup trucks drove stronger General Motors Co. profits during the most recent quarter, just as they did for Fiat Chrysler Automobiles.
The automaker on Thursday said it earned $2.4 billion during the second quarter, up 1.6% from the same period a year ago. That's despite sales for the first half of the year being down 4.2% over last year.
GM earned $3 billion in North America due in large part to pickups. That drove its profit margin to 10.7%.
"We expect our launch strength to continue in the second half of the year as our heavy-duty truck availability improves and as we launch new crossovers and entries from our new global family of vehicles," GM CEO and Chairman Mary Barra said on a call with investors.
FCA on Wednesday reported a 14% year-over-year profit increase and its best-ever second quarter in North America, fueled by the new heavy-duty Ram and Jeep Gladiator pickups
Meanwhile, Ford last week said its second-quarter profits slid 86% in the second quarter to $148 million because of global restructuring.
The full potential of the trucks has yet to be realized for GM, officials said. They expect the impact to continue as the truck launch progresses in the third and fourth quarters.
"We are in the early stages of demonstrating the earnings power of our leading truck franchise and see additional opportunity as we complete the launch of the heavy-duty trucks and looking into next year the launch of the full-size SUVs," GM CFO Dhivya Suryadevara said.
The second-quarter results came on revenue of $36.1 billion that declined by about 2% year-over-year. The roughly 11% increase in profits before taxes in North America came as the automaker lost $48 million from GM international operations. GM reported adjusted earnings per share of $1.64, which beat analyst expectations.
Autotrader Executive Analyst Michelle Krebs said GM's results were "better than expected particularly in light of the fact that sales volume and revenue are down."
"They are being disciplined on the cost side," Krebs said.
The automaker saved $700 million during the second quarter through its restructuring efforts and $1.1 billion for the first half of the year. GM has said it will save up to $2.5 billion this year through restructuring, which includes cutting 15% of its salaried workforce and ceasing production of cars like the Lordstown, Ohio-built Chevrolet Cruze. In addition to the Lordstown Assembly Plant, the Warren Transmission Plant is also on GM's list of four "unallocated" plants in the U.S. The Warren plant will close its doors Friday.
The United Auto Workers has said it plans to fight to keep GM product in the four plants. The UAW and the Detroit automakers recently entered contract negotiations. Contracts expire Sept. 14.
The automaker lost $279 million on the GM Cruise, the autonomous-vehicle unit of General Motors. Last month, Cruise announced an indefinite delay in the deployment of its driverless taxis. Cruise originally set a year-end launch deadline. When the taxis are deployed, they will launch in San Francisco.
"We have said from the beginning that the benefits of self-driving vehicles will only be realized by deploying safely and at massive scale," Barra said. "For the past four years, Cruise has been creating the necessary building blocks to do just that. It has expanded it’s workforce, raised billions of capital, achieved deep integration with General Motors, and focused on testing and development in one of the most complex urban environments."
GM said it was on track to invest $1 billion in Cruise this year. Cruise has been building up its workforce and now has 1,500 employees. The company plans to have 2,000 workers by year's end.
Barra told investors that during the second half of the year, Cruise will increase testing and the number of miles driven and increase community engagement. Barra wouldn't provide a timeline for deployment, but said there's a "line of sight."
GM's sales of trucks and SUVs were expected to help its earnings this quarter as they did during the first quarter. Overall, GM's sales were down about 1.5% year-over-year in the April-through-June period.
Sales of the Chevrolet Silverado 1500 crew cab and GMC Sierra 1500 crew cab, introduced in summer 2018, were both up 12%. Full production of all cab styles started in March, so sales of those models were down year over year because of limited availability.
GM started building all-new heavy-duty pickups in June. GM announced in June that it would increase capacity of heavy-duty models by 40,000 units at the Flint Assembly Plant. In May, the company announced upgrades for its Fort Wayne Assembly plant where the light-duty Chevrolet and GMC models are built.
The Chevrolet Equinox and Traverse and GMC Canyon delivered record results in the second quarter with the Equinox posting a 16% increase in sales, the Traverse a 6% increase and the Canyon a 24% increase.
"GM sales dipped in the second quarter, but things are looking up for the company for the back half of the year, with the Silverado and Blazer starting to pick up steam," said Jeremy Acevedo, Edmunds' senior manager of insights, in a statement. "The recent splashy Corvette debut should also help give some momentum to the Chevy brand."