DETROIT -- General Motors' strong second-quarter performance in China seemed to allay investors’ concerns that a slowdown in Chinese demand for cars would dent the company's bottom line.
GM reported overall net income of $1.1 billion in the second quarter, up from $190 million in the year-earlier quarter, which was marred by hefty recall-related expenses. The most recent quarter's results were fueled by strong North American demand for pickups and SUVs -- GM's biggest money makers -- and increased pretax profit and margins in China, even amid slowing sales growth there.
GM also said it stands by its previous forecast of improved pretax profits and margins for the year compared with last year. It expects operating income in the second half of the year to exceed the first half, in which it earned about $5 billion in pretax profit.
"We think our overall results demonstrate the very strong earnings potential of this company," CEO Mary Barra told analysts during a conference call. The result for the first half of the year "lays the foundation for the commitments we've made for 2016," she said, including a consistent 10 percent pretax profit margin in North America and breaking even in Europe.
GM’s pretax profit per share was $1.29, easily surpassing Wall Street’s forecast of $1.08. The company's shares, which have fallen in recent weeks on concerns over China, rallied as much as 7 percent today. The shares closed up 4 percent, or $1.24, at $31.54 in trading Thursday on the New York Stock Exchange.
The most recent quarter's net profit was hurt by about $1.1 billion in one-time items, including $600 million related to currency devaluation in Venezuela and about $400 million to restructure GM’s operations in Thailand, along with nearly $100 million in recall-related costs.
GM's pretax profit excluding those items -- the figure the company says is most reflective of its underlying performance -- more than doubled to $2.87 billion, from $1.35 billion a year earlier.
Revenue fell 4 percent to $38.18 billion, which GM blamed on the negative effect of currency devaluations.
In North America, the company’s pretax profit was $2.78 billion, the highest since GM's 2009 bankruptcy and double the recall-plagued second quarter of a year ago. A GM spokesman said it was a record pretax profit for any quarter as a restructured company, but could not say whether it was higher than any quarterly result prior to bankruptcy.
The company's pretax profit margin in the region was 10.5 percent, also the highest since bankruptcy and above GM's goal of 10 percent.
The results were driven by higher volumes overall and an improved mix of full-size pickups and SUVs and lower material and logistics costs.