GM posts Q2 net income of $1.3 billion, sales of $33.2 billion
The results, as GM executives signaled in recent days, surpassed the $865 in net income the automaker reported in the first quarter. GM reported a $12.9 billion net loss during the second quarter last year.
Second-quarter revenue was $33.2 billion, up 44 percent from $23.0 billion in the second quarter of 2009. First quarter revenues were $31.5 billion.
Earnings before interest and taxes -- a key measure used to determine the company's value -- came in at $2.0 billion during the quarter, up 11 percent from $1.8 in the first quarter.
In North America, GM said it earned $1.6 billion before interest and taxes, up 33 percent from $1.2 billion during the first quarter.
GM said its cash flow from operations was $3.9 billion. The company said it ended the second quarter with $32.5 billion in cash, although the balance sheet released today reported $31.5 billion in cash.
March to IPO
Showing improved profit is part of outgoing CEO Ed Whitacre's march toward selling shares in the nation's largest automaker after emerging from bankruptcy reorganization in July 2009. Whitacre, 68, said today he would step down as CEO on Sept. 1. GM named board member and longtime telecom executive Daniel Akerson, 61, to take over the company's helm.
GM is seeking to raise $12 billion to $16 billion in the offering, which would make it the second-largest in U.S. history, said a person familiar with the plan.
“That's what they're setting the stage for,” Mike Wall, an industry analyst with IHS Automotive, said before the release.
The more than 500-page document, called an S-1, is expected to be filed Friday, though it may not happen until Monday, said the person, who asked not to be named because the discussions are private. The exact value of the offering may not be fully detailed in the registration statement filed with the U.S. Securities and Exchange Commission, said the person.
The IPO would be the second-largest in U.S. history, behind Visa Inc.'s $19.7 billion initial offering in March 2008.
The IPO registration statement could be filed this month so that the stock sale could be held in November, people familiar with the matter have said.
Profits before interest and taxes at the company's international operations declined 42 percent to $672 million.
The automaker's European operations continued to drag down GM's overall results with a $160 million loss. The unit lost $506 million in the first quarter.
“I am pleased with our progress on achieving our business objectives,” Chris Liddell, GM's chief financial officer, said in the statement.
GM's sales in the U.S. rose 12 percent to 603,000 cars and trucks during the second quarter from 541,400 a year earlier, according to GM's report said. The company increased its U.S. customer discounts in the second quarter by an average of 7 percent per vehicle to $3,624, according to Autodata Corp.
GM said it built 731,000 vehicles in North America, an 85 percent increase from the same months last year.
GM's revenue and profit gains in the second quarter were driven by an increase in output and higher productivity in its plants.
“Last year GM was shutting down plants when they filed” Chapter 11, said Wall, who is based in Grand Rapids, Mich. “This summer, most of its U.S. plants were running full out.”
Models such as the Chevrolet Equinox, GMC Terrain and Cadillac SRX are selling well and with higher profit margins because GM lowered its costs in bankruptcy, Wall said.
Growth in China
Through the first half of the year, GM's China sales, including those of its joint ventures, rose 49 percent to 1.2 million vehicles compared with last year, according to the automaker. That exceeded the 1.1 million cars and trucks GM sold in the U.S. in the year's first half.
Chevrolet brand sales more than doubled in the first half in China, driven by strong sales of the Cruze small car. Buick sales rose 29 percent, according to J.D. Power & Associates. GM is the No. 2 seller in China, behind Germany's Volkswagen, according to J.D. Power.
“GM went through a rough time last year, but they never backed away from China,” said Tim Dunne, an analyst with J.D. Power. “China provides the bulk of their revenue and profits from Asia.”
During the second quarter, GM finished repaying $8.4 billion in U.S. and Canadian loans assumed as it emerged from bankruptcy.
Eager for IPO
Whitacre has said he is eager for the U.S. government to sell its 61 percent share of the automaker.
“We don't like this label of Government Motors,” he said last week.
GM, meanwhile, has secured as much as $5 billion in a revolving line of credit from a group of at least 15 banks as of last night, said the person.
Selim Bingol, a GM spokesman, declined to comment on details of the IPO.
The IPO would include a fifth of the U.S.'s shares, people familiar with the plan have said, which would bring the Treasury's stake below 50 percent.
Time is now
“You've got to get the money when the market is giving it,” Shelly Lombard, a debt analyst with New York-based Gimme Credit, said in a telephone interview before the release. “Now is the time for GM to do an IPO.”
The UAW retiree medical fund now holds 17.5 percent of GM, the Canadian government has 11.7 percent and debtors are left with 10 percent.
GM's announcement this week that its board had changed the rules of minimum ownership to call a special meeting to 25 percent from 15 percent was likely taken in preparation for an IPO, said Logan Robinson, a distinguished visiting law professor at the University of Detroit Mercy.
“You want to get your takeover defense in place before you go public,” said Robinson, a former general counsel at Delphi Corp., where he worked on the auto supplier's stock offering and spinoff from GM.
Bloomberg and Reuters contributed to this report
PRESS RELEASE: GM Second Quarter 2010 Results Show Sustained Progress
• GM achieves second consecutive quarter of profitability and positive cash flow
• Net income of $1.3 billion and EPS of $2.55, free cash flow of $2.8 billion
DETROIT, Mich. – General Motors Company today announced its second quarter 2010 results, marked by revenue of $33.2 billion and net income attributable to common stockholders of $1.3 billion, resulting in earnings per share on a diluted basis of $2.55. GM's second quarter earnings before interest and tax (EBIT) was $2.0 billion.
GM North America had EBIT in the second quarter 2010 of $1.6 billion, up from $1.2 billion in the first quarter. GM Europe had a loss before interest and taxes of $0.2 billion, an improvement of $0.3 billion from the first quarter. GM International Operations posted EBIT of $0.7 billion, down from $1.2 billion in the first quarter.
Cash flow from operating activities was $3.9 billion and after adjusting for capital expenditures of $1.1 billion, free cash flow was $2.8 billion. GM ended the second quarter with $32.5 billion in cash and marketable securities, including funds in the Canadian Health Care Trust escrow.
“I am pleased with our progress on achieving our business objectives,” said Chris Liddell, vice chairman and chief financial officer. “We have delivered strong product, maintained cost discipline, progressed strategic initiatives such as restructuring Europe and acquiring AmeriCredit, and delivered two consecutive quarters of profitability and positive cash flow.”