43
GM posts significant increase in earnings, plans for more Takata impact
By Kalea Hall
LORDSTOWN
A focus on profitability led General Motors to report a 157 percent increase in its second-quarter earnings.
But on the same day of its strong report, GM said an additional 4.3 million vehicles could be affected by the Takata airbag recall – and that could cost the company $550 million.
“We presently believe that the results of further testing and analysis will demonstrate that the vehicles do not present an unreasonable risk to safety and that no repair will ultimately be required,” GM said in a securities filing.
The company already has recalled 2.5 million trucks and sport utility vehicles at an estimated cost of $320 million because of airbag concerns.
In its earnings report, GM reported net income of $2.9 billion for the second quarter of 2016, which compares with the $1.1 billion reported in the second quarter of 2015.
Net revenue came in at $42.4 billion, a record for the company, which compares with the $38.2 billion reported in the second quarter of 2015.
GM sold 2.4 million vehicles globally in the second quarter of 2016, which is about equal to the second quarter of 2015. Through June 30, the company sold 4.76 million vehicles globally, which is down slightly by 1.2 percent from last year’s figures.
“I think this is a very significant report in that it shows GM is putting profitability ahead of market share,” said Matt DeLorenzo, managing editor of Kelley Blue Book. “The message here is that GM is being very disciplined in the types of sales they are making.”
GM has cut back on fleet sales to focus on retail sales, or sales to individual customers.
GM’s growth in profits is positive for the production plants, including the GM Lordstown Assembly Plant where the Chevrolet Cruze is built and 4,500 employees work.
“The important thing is that each car they are building, they are making money on – and that will keep the doors open,” DeLorenzo said.
For the quarter, GM’s North American sales were down 5.7 percent to 909,889, and for the year, they are down 2.6 percent to 1,708,838.
In China, sales were up 11.8 percent for the quarter and 5.3 percent for the year.
“This was an outstanding quarter for GM,” said Mary Barra, GM chairwoman and chief executive officer, in a statement. “Our results were generated by strong retail sales in the U.S., record sales in China and a continued emphasis on improving the performance of our operations worldwide.”
As for the airbags, more than 100 million vehicles made by multiple automakers have been recalled worldwide for the faulty Takata airbags that, when inflated, can explode and spew shrapnel. The ruptures have been connected to 10 deaths in the U.S. and more than 100 injuries.
In May, the National Highway Transportation Safety Administration expanded the growing Takata recall to include 35 million to 40 million airbag inflators that need to be replaced by 2019. Before that expansion, 28.8 million inflators already had been recalled.
GM plans to work to show the NHTSA by September that the inflators in its vehicles “do not pose an unreasonable risk to safety.” If the company doesn’t prove this, then it will have to repair the front passenger airbag inflators.
GM says the inflators in its vehicles are performing and show no signs of “propellant degradation” because of the unique design characteristics of the vehicles and the differences in the airbag inflators in those vehicles.