General Motors Company (NYSE:GM) posted better-than-expected second-quarter results driven by its strong performance in North America and China, backed by trimmed losses in the European market. The US automaker’s revenue rose 3.9% during the quarter, but net income dropped 16% from the year-ago quarter on account of the international market, which showed signs of weakness. Let’s take a closer look at some essential figures of the quarter.
A look at the results
The top US automaker reported revenue of $39.1 billion, up 3.9% from last year. This was majorly driven by strong pickup demand in the North American market, where the Detroit automaker earned good money. However, second-quarter earnings fell 20% to $1.2 billion from $1.5 billion a year earlier due to mixed results in the international market.
The United States was the key market, where sales rose 9% to $23.5 billion and operating income increased 4% to nearly $2.0 billion. General Motors Company (NYSE:GM) reported its second-quarter earnings just a day after fellow Detroit-player Ford Motor Company (NYSE:F) came out with its results. Both of the automakers are gaining massively with the revival of the housing sector, which is boosting the demand for pickups.
However, Ford Motor Company (NYSE:F) was a step ahead of General Motors Company (NYSE:GM) and not only reported higher operating margins, but posted more vehicle deliveries as well. Ford Motor Company (NYSE:F) generated a $2.3 billion profit compared to its bigger rival, which recorded slightly less than a $2.0 billion profit from the North American business. Moreover, Ford sold 823,000 vehicles in North America compared to General Motors Company (NYSE:GM), which sold 809,000 units. Globally, General Motors Company (NYSE:GM) sold 2.5 million cars in the second quarter while Ford delivered 1.7 million vehicles.
Dealing with the dull market
Europe remains an area of concern for General Motors Company (NYSE:GM); the company experienced a 7% decline in revenue to $5.2 billion. However, one of the important things in the quarterly results was the narrowing European losses resulting from the automaker’s cost-cutting effort.
Both General Motors and Ford saw improvement in the European market. Though the macroeconomic outlook and future demand across the Atlantic remains poor, the Detroit automakers worked on trimming down overhead costs. General Motors managed to restrict its European loss to $110 million, remarkably down from $394 million in last year’s quarter. Ford’s European loss also contracted to $348 million from $404 million last year.
International market with mixed results
General Motors experienced a rough quarter in the international market including Southeast Asia, India and Australia where its Japanese rivals took advantage of the weakening yen and lowered car prices.
A weaker yen is giving room to the Japanese automakers to have lower prices to boost sales and compete with their US rivals. It bolstered Toyota Motor Corporation (ADR) (NYSE:TM)’s profit to $3.2 billion in the latest quarter. The currency gives Toyota Motor Corporation (ADR) (NYSE:TM) a massive cost advantage to manufacture vehicles in Japan. Additionally, the automaker is also undertaking cost-reduction techniques to bolster its profit.
Even Nissan is benefiting from the weakening yen, which helped its profit climb 14% in the last quarter. The company can use this financial gain to offer cars at discounted prices, increase advertisements, and invest in developmental activities.
Both Ford and General Motors are flourishing in the domestic market, but are sensing the pressure coming from their Japanese counterparts in the international market.
General Motors saw a huge drop in its profit from international operations, which fell 64% to $228 million. However China, where the company is the largest foreign automaker, remains an attractive market. Strong demand for Cadillac and Buick automobiles in the mainland helped the automaker to alleviate the effect of softer sales in the rest of the international market.
On the whole, General Motors’ Chief Executive Dan Akerson is happy with the condition in the domestic market as well as China, which is assisting the company to overcome challenges in the European market and the international division.