GM profit doubles as sales and prices rise
Thursday, August 4, 2011
DETROIT (AP) — After years of big discounts, GM is charging customers more for its cars and trucks, and it’s helping the bottom line.
General Motors Co. said Thursday its second-quarter profit nearly doubled. Higher pricing — mostly in North America — added $1 billion to its results.
Despite the good news, GM’s stock faltered as the market saw its worst drop in three years. Investors fretted about the economic outlook and GM’s admission that the second half won’t be as strong as the first. GM shares fell 4 percent to $25.99, their lowest closing price since the company’s November public stock offering.
The company’s net income totaled $2.5 billion, or $1.54 per share. It was GM’s third straight quarterly profit since the IPO, and its sixth straight overall.
Revenues rose 19 percent to $39.4 billion.
The numbers show how far GM has come since the days before its 2009 bankruptcy, when it cranked out too many mediocre products and was forced to offer big discounts to clear them off the lots. GM has closed plants, shuttered brands and plowed the savings into making better vehicles.
The new Chevrolet Cruze, for example, was the best-selling car in the U.S. in June. Buyers are paying an average of $4,300 more for it than they paid for its predecessor, the lackluster Chevrolet Cobalt. The Cruze also sold well in China, where Chevrolet’s June sales rose 34 percent. Plush new entries like the Buick LaCrosse sedan and GMC Terrain crossover are also commanding higher prices.
GM can charge more because it’s making highly desirable vehicles, GM’s North American President Mark Reuss said Thursday at an industry conference in northern Michigan. And there are more in the pipeline. Reuss said GM will add two Cadillacs to its lineup next year, and the subcompact Chevrolet Sonic will go on sale soon.
GM’s numbers topped those at Chrysler and Ford, which struggled with the rising cost of raw materials like steel. GM also paid more for materials but mitigated the losses with price increases. The company has raised the price of its vehicles three times this year, for a total of around $500 per vehicle, Chief Financial Officer Dan Ammann said.
But the price hikes haven’t dampened demand. GM’s sales rose 7 percent to 2.3 million cars and trucks, and the company gained market share in every region outside South America.
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