In this July 27, 2011 photo, assembly line worker Edward Houie moves a door into position for a 2012 Chevrolet Volt at the General Motors Hamtramck Assembly plant in Hamtramck, Mich. General Motors Co. said Thursday, Aug. 4, 2011, its second-quarter profit nearly doubled to $2.5 billion as it got higher prices for its cars and trucks worldwide.(AP Photo/Paul Sancya)
DETROIT — After years of big discounts, GM is finally getting a good price for its cars and trucks, and it's helping the company's bottom line.
General Motors Co. surprised Wall Street Thursday by doubling its second-quarter profit. A big reason was higher prices for its vehicles worldwide.
The company's net income totaled $2.5 billion, or $1.54 per share. That compared with $1.3 billion, or 85 cents per share, in the same quarter a year earlier. It was GM's third straight quarterly profit since its initial public stock offering in November, and its sixth straight overall.
The results were stronger than those of Ford and Chrysler, which reported results last week. Chrysler posted a loss on a big repayment of government debt. Ford's earnings took a hit as it expanded in Asia, a region where GM is dominant.
GM Chief Financial Officer Dan Ammann said the company gained $1 billion from higher prices for its cars and trucks. More than half of that came from North America.
GM was able to pull back on rebates and other deals in the second quarter because of severe earthquake-related shortages at Toyota Motor Corp., Honda Motor Co. and other competitors. When demand for small cars rose in the spring because of high gas prices, GM was able to meet that demand with its new Chevrolet Cruze while Toyota and Honda sat on the sidelines. GM's incentive spending per vehicle fell 20 percent to $3,022 in June, according to car pricing site TrueCar.com.
The company also has raised prices to compensate for the higher cost of raw materials such as steel, although Ammann said those costs abated somewhat in the second quarter. Popular products like the Chevrolet Equinox and GMC Terrain also didn't need incentives to sell in big numbers.
The trend may not hold in the second half of the year,
when Japanese inventories are restocked and competition will heat up. But GM has vowed not to go back to its old ways of doing business, when it overproduced vehicles just to keep its factories open and then offered huge discounts to sell them off.
Meanwhile, second-quarter revenue rose 19 percent to $39.4 billion, while sales rose 7 percent to 2.3 million cars and trucks. Although sales softened somewhat in the U.S. and Europe because of buyers' worries about the economy, GM gained market share in every region outside South America.
It was the first time since GM emerged from bankruptcy protection two years ago that all of its regions were profitable. Europe, which is undergoing a restructuring, reported a profit of $100 million, versus a $160 million loss a year earlier. In North America, where the bulk of GM's profits come from, the company earned $2.2 billion, up from $1.6 billion.
GM won more customers in the U.S. thanks to the Cruze, which was the best-selling car in America in June. The Cruze also sold well in China, where Chevrolet's June sales rose 34 percent.
"GM's investments in fuel economy, design and quality are paying off around the world," GM Chairman and CEO Dan Akerson said in a statement.
GM blew past Wall Street's estimates. Analysts polled by FactSet forecast earnings of $1.18 per share on revenue of $36.56 billion.
The company's stock price rose 3 cents to $27.20 in pre-market trading.
GM's shares have been trading nearly 20 percent below the offering price of $33 in November. They peaked at $39.48 in January but fell to a low of $27.05 on Tuesday. Investors are concerned about the strength of the economic recovery and the health of a company that is just two years out of bankruptcy protection. GM reported its biggest profit in more than a decade in the first quarter, but its stock fell as investors noted that nearly half the profit was from the sale of GM's stake in an auto parts company.
Although GM made $5.7 billion in the first half of the year, Ammann said the company's second half performance will probably not be as robust, since there is usually a drop in sales in the fall and the economy remains shaky.
"There's a high level of uncertainty out there," he said.
GM's results are being closely watched by the U.S. government, which still holds 500 million GM shares that it got as part of the company's 2009 bailout package. The government needs $26.4 billion to recoup its full investment in GM, meaning GM's shares would have to sell for roughly $53 per share.
The Treasury Department said in May that it would wait until this month, at the earliest, to sell more GM shares. But it could also decide to wait until after GM completes its latest contract talks with the United Auto Workers union. The UAW contract expires Sept. 14.
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