Given General Motors' steady stream of recalls this year (including a
single day with around 8.4 million vehicles needing repair), it's not
a huge surprise that the cost to deal with all of the problems will be
GM Reports Second Quarter Net Income of $0.2 Billion
EBIT-adjusted of $1.4 billion, after $1.2 billion in recall-related
costs and $0.2 billion in restructuring costs
Company records strong core operating performance in the second
Special charge of $0.4 billion for GM ignition switch compensation
DETROIT General Motors Co. (NYSE: GM) today announced second quarter
net income attributable to common stockholders of $0.2 billion, or
$0.11 per diluted share. Strong core operating performance during the
quarter was offset by a pre-tax net loss from special items of $1.3
billion, or $(0.47) per diluted share, and costs of $1.2 billion
pre-tax primarily for recall-related repairs, or $(0.44) per diluted
"Our underlying business performance in the first half of the
year was strong as we grew our revenue on improved pricing and solid
new vehicle launches," said GM CEO Mary Barra. "We remain
focused on keeping our customers at the center of all we do, and
executing our plan to operate profitably in every region of the
In the second quarter of 2013, GM's net income attributable to common
stockholders was $1.2 billion, or $0.75 per diluted share, which
included a net loss from special items that reduced net income by $0.2
billion, or $(0.09) per diluted share.
Earnings before interest and tax (EBIT) adjusted was $1.4 billion and
included the impact of $1.2 billion in recall-related costs and $0.2
billion in restructuring costs. This compares to the second quarter of
2013, when the company recorded EBIT-adjusted of $2.3 billion, which
included a charge of $0.2 billion for recalls and $0.1 billion in
Net revenue in the second quarter of 2014 was $39.6 billion, compared
to $39.1 billion in the second quarter of 2013. In the first six
months of 2014, revenue rose to $77 billion, up from $76 billion in
the same period a year ago.
GM Results Overview (in billions except for per share amounts)
Net income attributable to common stockholders
Earnings per share (EPS) diluted
Impact of special items on EPS diluted
Automotive net cash flow from operating activities
Adjusted automotive free cash flow
GM North America reported EBIT-adjusted of $1.4 billion which included
the impact of $1.0 billion in recall-related costs in the quarter.
This compared with EBIT-adjusted of $2.0 billion in the second quarter
of 2013, which included the impact of $0.1 billion in recall-related
costs in the quarter.
GM Europe reported an EBIT-adjusted of $(0.3) billion, which includes
$0.2 billion for restructuring costs. This compares with $(0.1)
billion of EBIT-adjusted in the second quarter of 2013.
GM International Operations reported EBIT-adjusted of $0.3 billion,
compared to $0.2 billion in the second quarter of 2013.
GM South America reported EBIT-adjusted of $(0.1) billion, compared
with EBIT-adjusted of $0.1 billion in the second quarter of 2013.
GM Financial earnings before tax was $0.3 billion for the quarter,
compared to $0.3 billion in the second quarter of 2013.
A special charge of $0.4 billion was taken for the GM ignition switch
compensation program. There is no cap on this program, but this charge
is the company's best estimate of the amounts that may be paid to
claimants. Due to the unique nature of the program, this estimate
contains significant uncertainty and it is possible the total cost
could increase by approximately $0.2 billion.
As previously disclosed, going forward the company expects recall
expense to normalize to a slightly higher rate than it experienced
prior to this year, but not materially. The company is changing how it
estimates future recall expense and will now accrue at the time of
vehicle sale an amount that represents management's best estimate of
future recall costs in North America. As a consequence of this change,
GM is taking a $0.9 billion non-cash pre-tax special charge in the
second quarter for the estimated costs of future possible recalls for
up to the next 10 years on 30 million GM vehicles on the road today.
Cash Flow and Liquidity
For the quarter, automotive cash flow from operating activities was
$3.6 billion and automotive free cash flow adjusted was $1.9 billion.
GM ended the quarter with very strong total automotive liquidity of
$38.8 billion. Automotive cash and marketable securities was $28.4
billion compared with $27.0 billion for the first quarter of 2014.
"With successful new vehicle launches, we continue to generate
strong results in the U.S. and China and remain on track to be
profitable in Europe by mid-decade," said Chuck Stevens, GM
executive vice president and chief financial officer. "We are
confident we are currently on or ahead of plan to deliver the results
we promised earlier this year, excluding the effects of recalls."