General Motors profit nearly doubles

General Motors Co's quarterly profit nearly doubled, beating expectations, as the top US automaker took a larger share of global sales and raised prices on its vehicles at a time when major Japanese competitors were largely sidelined. Despite the stronger-than-expected results, GM faces a tough second half of 2011 with risks from a sputtering economy and Japanese rivals itching to retake share as they recover from the March earthquake in Japan.
GM shares, which initially rose after the results, were down 3.2 percent in early trading. "It was a solid quarter that shows GM's return to health is on track," said Matt Collins, an analyst with Edward Jones. "But with Japanese automakers getting back in the game while the economy appears to be stalling, this is probably as good as it gets this year."
Coming out of bankruptcy, GM Chief Executive Dan Akerson and other executives said the company had stripped out enough costs to recession-proof the business so it could thrive even in a weak auto market. The first major test for that claim for investors, including the US Treasury, will be how GM performs if the economy slips back into recession.
"There is an increased level of uncertainty," GM Chief Financial Officer Dan Ammann told reporters. "But what we're trying to do, and what we've done successfully, is to configure the business with a low break-even point and a strong balance sheet so we can handle whatever scenario comes along." The US automaker is pushing heavily into smaller, more fuel-efficient cars like the popular Chevrolet Cruze, but a good portion of its profit still relies heavily on sales of more profitable trucks in the US market.
Higher pricing and reduced discounts on strong-selling vehicles like the Cruze and the Chevy Equinox drove GM's profitability in its home market in the second quarter. Net income in the second quarter rose to $2.52 billion, or $1.54 per share, from $1.33 billion, or 85 cents per share, a year earlier. The earnings per share blew past the $1.20 analysts polled by Thomson Reuters I/B/E/S had projected on average. Revenue rose 19 percent to $39.4 billion, above the $36.74 billion analysts had expected during a quarter in which US auto sales hit a soft patch.