Despite a drop in U.S. market share, General Motors posted record second-quarter net income of $1.73 billion, its third straight quarter of strong profits.
GM's net income for the second quarter, which excludes spun-off Delphi Automotive Systems Corp., was more than five times as much as last year's, when a strike-related shutdown cost GM $890 million in profits in the second quarter.
'We're now building a record of sustainability,' CFO Mike Losh said in a phone interview on Tuesday, July 20. 'That's exactly what our challenge is. We've done it for three quarters in a row, and we need to do it for three years in a row.'
GM net sales for the quarter rose 20.9 percent to $45.1 billion. However, its share of the U.S. light-vehicle market fell 2.1 percentage points to 29.5 per-cent, from 31.6 percent for the year-ago quarter.
GM's worldwide market share for the quarter dropped 0.8 percentage points to 16.5 percent.
Losh said reductions in material costs, an improved vehicle mix - GM is selling more trucks and more content in both cars and trucks - boosted the company's profits. GM also increased deliveries to dealers. It delivered 2.33 million vehicles to dealers worldwide for the quarter, up 13.1 percent from the second quarter of 1998.
GM lost about 227,000 vehicles during the 1998 second quarter when strikes in Flint, Mich., forced it to shut most of its North American assembly plants.
In a bid to increase value to shareholders, GM repurchased 7.5 million shares of its common stock for $520 million during the second quarter and expects to spend an additional $1.7 billion on its stock buyback program by year end.
Since January 1997, GM has repurchased about 115 million shares worth $7.3 billion, or about 15.2 percent of its total outstanding shares.
GM's cash and marketable securities were $16.7 billion as of June 30, up from $16.2 billion at the end of the first quarter.
GM believes the buyback program and continuing profitability will win respect on Wall Street. Losh also is encouraged by GM's U.S. market share topping 30 percent for June.
Still, the company has its sore spots.
Although GM Europe's market share and profits rose during the quarter, its net income of $187 million was still below earlier periods. During the late 1980s and early 1990s, GM Europe's annual profits hovered around $1 billion.
'That is an area in which we do need to improve,' Losh said. 'And that improvement needs to come from two aspects. One is we're back on the right trend in terms of market share with the new Astra and the Zafira. And Europe has its challenges on the cost-reduction side as well,' Losh said.
Losh said changes to the Omega and Vectra cars later this year and an all-new Corsica next year will increase GM Europe's sales.
Elsewhere in the world, lagging regional economies hurt GM.
GM Asia Pacific lost $81 million during the quarter, compared with a loss of $36 million for the second quarter of 1998. GM Latin America, Africa, Mid-East lost $38 million, compared with net income of $48 million for the year-ago quarter.
Even so, GM has said it expects Asia to rebound, and Losh said GM's performance in Latin America is probably better than that of its competition.