General Motors today reported significantly improved 2006 second quarter financial results. Global automotive operations were profitable on an adjusted basis, excluding special items, for the first time since 2004, and the company posted a second consecutive quarter of record revenue. GM reported a net loss of $3.2 billion, or $5.62 per share, for the second quarter of 2006, compared with a reported loss of $987 million, or $1.75 per share, for the year-ago quarter. The net loss for the quarter included a total of $4.3 billion, or $7.66 per share, in special items that reflected a previously announced $3.7 billion after-tax charge related to employee buyouts. GM posted 2006 second-quarter adjusted net profit, excluding special items, of $1.2 billion, or $2.03 per share, on record revenue of $54.4 billion. This reflects a $1.4 billion improvement from the year-ago adjusted loss of $231 million, or $0.41 per share, on revenue of $48.5 billion. It also greatly surpasses analyst expectations of an $0.80 per share adjusted profit.
GM’s global automotive operations earned $362 million on an adjusted basis, excluding special items, representing an improvement of $1.3 billion year-over-year. This is due primarily to significant improvement in GM North America and continued profitability improvement in other regions.
GM North America posted an adjusted net loss of $85 million, excluding special items, in the second quarter of 2006, a $1.1 billion improvement over the prior year period. The improvement is attributable to reductions in GM’s cost base across a broad range of activities, including improvement in warranty and other quality-related costs and a reduction in ongoing pension expense, due largely to the success of the hourly attrition program.
GM Europe posted adjusted earnings, excluding special items, of $124 million for the quarter , an improvement of $94 million compared with earnings of $30 million in the second quarter of 2005. The improved earnings reflect favorable material costs and improvements in pricing.
“With the support of our employees, unions, dealers, suppliers and stockholders, we are moving rapidly and aggressively to address our challenges and restructure GM for future success,” said Rick Wagoner, GM chairman and chief executive officer. “It’s rewarding to see our automotive business return to profitability on an operating basis and a clear sign that we’re on the right track, but there is more work to be done.”
Wagoner also said the success of the accelerated attrition program in the United States , along with other cost initiatives, led GM to increase its structural cost reduction target in North America to $9 billion from $8 billion on an average annual running rate basis by the end of 2006.
“Our turnaround has not just gained traction, it’s accelerating into high gear,” Wagoner said. “While significant work still remains, our ability to identify and initiate $9 billion in cost cuts over the course of the past year is unprecedented in this industry.
“We’re particularly pleased with the speed with which our people have implemented our turnaround plan. Conventional wisdom is that you can’t turn a ship as big as GM around quickly. We aim to prove that conventional wisdom wrong.”
