GM posts $2.5 billion profit, led by North America

General Motors on Thursday posted a profit of $2.5 billion for the second quarter, led by strong results in North America.

GM's net income for the April-through-June period nearly doubled from $1.3 billion in the year-earlier quarter. It was GM's sixth consecutive quarterly profit since exiting bankruptcy in mid-2009.

Revenue grew 19 percent to $39.4 billion.

"GM's investments in fuel economy, design and quality are paying off around the world as our global market share growth and financial results bear out," GM CEO Dan Akerson said in a statement.

Net income in North America rose 41 percent from the second quarter of 2010 to $2.2 billion.

The automaker's struggling European unit posted a $102 million net profit, reversing a $160 million loss a year earlier.

GM, explaining why it considered regional earnings to be net rather than earnings before interest and taxes, said interest and taxes are recorded centrally at the corporate level, so "there are no reconciling items" between regional EBIT and net attributable to shareholders.

GM said that "based on current industry outlook," it expects its earnings for the second half of the year to be "modestly lower" than in the first half. First-half net totaled $5.4 billion.

GM ended the quarter with $33.8 billion in automotive cash and marketable securities, up 10 percent from the end of the first quarter.

Stronger pricing

GM CFO Dan Ammann said stronger pricing contributed about $1 billion to profits, before interest and taxes.

"We were able to get prices up and incentives down. And that really, from our perspective, highlights the value that the customers are seeing in the product," Ammann told reporters at GM's headquarters.

GM has no immediate plans to divert some of its cash toward a stock buyback or dividends, choosing instead to build toward a "fortress balance sheet," Ammann said.

"We want to be able to invest in the product portfolio at all points in the cycle," he said, and "withstand any sort of economic shock that could come along."

GM's stock price has sagged in recent months amid economic uncertainty that has depressed auto sales industrywide. Shares closed at $27.17 on Thursday, down about 18 percent from its initial public offering price of $33 in November.

Higher share

Still, GM gained U.S. market share during the second quarter as Japanese rivals struggled with inventory shortages from the March earthquake. GM's market share grew to 20.4 percent from 19.4 percent a year earlier, according to the Automotive News Data Center.

Analysts recently have voiced concern over GM's larger-than-usual inventory of full-sized pickups. GM said earlier this week that it had a 115-day supply of pickups as of the end of July; analysts say 80 or less is typical.

Strong pickup production likely aided second-quarter results. But analysts are worried that GM could be forced to increase incentive spending to move the trucks, which would hurt profits later on.

In a research note released Wednesday, Barclays Capital analyst Brian Johnson said GM produced 273,000 pickups in the second quarter, which was about 50,000 more than he expected.

103 percent

In the second quarter, GM said, the automaker used 103 percent of its North American production capacity--on a two-shift, annualized basis--up from 93 percent a year earlier. It did not give a breakdown between truck and car production.

Earlier this week, GM said it expects demand for pickups to grow in the second half of the year, which should whittle its inventory to 90 days by year end.

The automaker also said it wants a cushion of inventory because it will lose several weeks of production next year as it prepares assembly plants to build its next-generation pickup.

GM's European operations swung to the black despite incurring restructuring costs of about $100 million.

South American operations' net profit fell 71 percent to $57 million from $195 million a year earlier. Net at GM International Operations, including Russia, China and Korea, rose 14 percent to $573 million.

Pretax profit at GM Financial totaled $144 million. GM Financial was not a subsidiary in the year-earlier period.

By Mike Colias- Automotive News