General Motors reported second quarter 2014 net income of $200 million, or 11 cents per diluted share, on net revenue of $39.6 billion. The automaker’s strong core operating performance was offset by a pre-tax net loss from special items of $1.3 billion, or 47 cents per diluted share, as well as pre-tax costs of $1.2 billion, or 44 cents per share, for recall-related repairs.
“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 world.”
Compared to last year, net revenue in Q2 2014 was up $500 million compared to the $39.1 billion reported during the same quarter a year ago. Meanwhile, Q2 2014 net income was down $1 billion compared to the $1.2 billion, or 75 cents per share, reported in Q2 2013. The Q2 2013 results 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 the $1.2 billion in “recall-related costs”, as well as $200 million in restructuring costs. The results are down by $900 million compared to the second quarter of 2013, when GM reported EBIT adjusted of $2.3 billion, which included a charge of $0.2 billion for recalls and $0.1 billion in restructuring costs.
|METRIC||Q2 2014||Q2 2013||DELTA 2014 VS. 2013||PERCENT CHANGE|
|NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS||$0.20||$1.20||-1.00||-83.33%|
|EARNINGS PER SHARE (EPS FULLY DILUTED)||$0.11||$0.75||-0.64||-85.33%|
|IMPACT OF SPECIAL ITEMS ON EPS FULLY DILUTED||($0.47)||($0.09)||-0.38||422.22%|
|AUTOMOTIVE NET CASH FLOW FROM OPERATING ACTIVITIES||$3.60||$4.50||-0.90||-20%|
|ADJUSTED AUTOMOTIVE FREE CASH FLOW||$1.90||$2.60||-0.70||-26.92%|
Regional Division Results
- GM North America reported EBIT-adjusted of $1.4 billion, compared with EBIT-adjusted of $2.0 billion in the second quarter of 2013. The EBIT-adjusted reported for the second quarter of 2014 included the impact of $1.0 billion in recall-related costs, while the EBIT-adjusted in the second quarter of 2013 included the impact of $0.1 billion in recall-related costs.
- GM Europe reported an EBIT-adjusted of $(0.3) billion compared with $(0.1) billion of EBIT-adjusted in the second quarter of 2013. The EBIT-adjusted reported in the second quarter 2014 includes $0.2 billion for restructuring costs.
- GM International Operations reported EBIT-adjusted of $0.3 billion, compared to $0.2 billion in the second quarter 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.
General Motors incurred a special charge of $400 million for the 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. The automaker states that “due to the unique nature of the program, this estimate contains significant uncertainty and it is possible the total cost could increase by approximately [$200 million]”.
The General also stated that it “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
Automotive cash flow from operating activities for the second quarter of 2014 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.”