Robust sales drive GM profits

General Motors (GM) said Thursday that its second-quarter net income rose six-fold to around $1.12 billion (1.02 billion euros), from $200 million during the same period last year. The Detroit-based company made 67 cents per share from April to June, compared to 11 cents a year ago.

At the same time, GM's revenue worldwide dropped 1.4 percent to $38.18 billion. The firm's shares jumped about 6 percent in pre-market trading.

North American truck sales and continued strength in the Chinese market helped GM to improve its profit margins.

The company said it expected pre-tax profits to be better in the second half than the first, when it made $5 billion. Chief Financial Officer Chuck Stevens reaffirmed GM's forecast that operating profit for the full year would improve from last year's $9.3 billion.

GM's North American operations were the main engine of growth for the company, as profits and profit margins in the region nearly doubled to $2.8 billion and 10.5 percent respectively.

The automaker's North American results, however, were hit by a $75 million charge for a compensation fund for victims in its recall of millions of vehicles with defective ignition switches. That resulted in the cost of the compensation fund to rise to $625 million. Previously GM had expected to pay up to $600 million.

Key market China

CFO Stevens said the automaker still expects to maintain strong profitability in China, despite slower-than-expected vehicle sales and intensifying price competition in the world's largest vehicle market.

"Our long term view on China hasn't changed," Stevens said. Within the next 10 to 15 years, China's auto market will grow to 35 million vehicles a year, he noted. Automakers sell about 20 million vehicles a year in China now.

GM has committed to spending about $14 billion on new vehicles and facilities in China over the next several years. Spending on new models won't slow, Stevens said, but GM will "monitor and time and continue to evaluate" when to add new capacity on the Chinese market.

Nevertheless, the second-quarter results indicate there is still a long way ahead for GM's European subsidiary Opel to return to profitability. During the second quarter, GM managed to reduce the operating loss of its European operations - involving Opel and British carmaker Vauxhall - to only $45 million. A year ago, the corresponding figure stood at $305 million.

So far this year, GM has spent $2.1 billion buying back its shares and has spent $1.1 billion on dividends. Under pressure from activist investors, GM agreed to repurchase $5 billion worth of its shares by the end of 2016.

sri/cjc (AP, Reuters, dpa)