automotive news
July 22, 2014
Article Quotes:
GM Sales Surge Despite Recalls As Barra Proves Quality Sells
General Motors Co.’s Mary Barra is projected to report her second straight quarter of rising sales, adding to evidence that the CEO is weathering the biggest wave of recalls in U.S. automotive history.
Second-quarter revenue may rise 2.7 percent, the average of estimates compiled by Bloomberg.
Barra, who has been before congressional panels four times in six months as the first female CEO of a global automaker, is benefiting from booming demand for redesigned large SUVs and heavy-duty pickups introduced on her watch even as she’s grappled with the almost 29 million vehicles recalled in North America, including 2.59 million compact cars with potentially faulty ignition switches linked to at least 13 deaths. GM shares, as of Tuesday, have gained 6.2 percent since the small-car recalls began in February.
“From a legal, fiduciary, protecting-the-franchise standpoint in the congressional testimony environment, I thought she was phenomenal,” Adam Jonas, an analyst with Morgan Stanley, said Tuesday in a telephone interview. “She navigated a minefield in a way that was really, really good.”
While recall headlines have dominated in the U.S., sales have increased, rising 2.5 percent through June. The total U.S. market rose 4.3 percent during the same period. GM’s results have been helped by new SUVs such as the Cadillac Escalade, which rose 18 percent in the first half, and GMC Yukon, which gained 54 percent. The Buick brand, helped by the new Encore small SUV, rose 13 percent.
The sales gains come as GM reduces its spending on incentives, according to researcher Autodata Corp. The average spending per vehicle on light-duty trucks fell 10 percent during the first half while Ford Motor Co.’s truck spending rose 2.3 percent.
“We expect GM results to improve markedly in 2Q, as the profit impact of transitioning to a new line of full-size ‘heavy-duty’ pickup trucks and large SUVs goes from a modest headwind in 1Q to a significant tailwind in 2Q,” Ryan Brinkman, an analyst at JPMorgan Chase & Co., wrote in a note to investors.
Encouraged by the second quarter, some analysts such as Itay Michaeli of Citigroup Inc. expect GM will forecast an accelerating second half. Second-quarter earnings per share may slide by almost a third to 58 cents. The company projected a $1.2 billion charge in the quarter for recalls.
“If you set aside the ignition-switch disaster, GM has produced an array of cars that people really like,” said Erik Gordon, a professor at the Ross School of Business at the University of Michigan in Ann Arbor. “It’s hard to remember that because the ignition recall is such a disaster.”
Truck production, including light- and heavy-duty pickups and large SUVs, rose 18 percent through June compared to a year ago to reach the highest level since the fourth quarter of 2007, estimated Brinkman. GM built more Cadillac Escalades than in any quarter since the first three months of 2008, he wrote.
Average transaction prices on the Escalade “are through the roof,” he wrote. “We expect ‘Suburban-sized’” North American profits excluding recall costs, he said, referring to the large Chevrolet SUV.
July 22, 2014
Article Quotes:
GM Sales Surge Despite Recalls As Barra Proves Quality Sells
General Motors Co.’s Mary Barra is projected to report her second straight quarter of rising sales, adding to evidence that the CEO is weathering the biggest wave of recalls in U.S. automotive history.
Second-quarter revenue may rise 2.7 percent, the average of estimates compiled by Bloomberg.
Barra, who has been before congressional panels four times in six months as the first female CEO of a global automaker, is benefiting from booming demand for redesigned large SUVs and heavy-duty pickups introduced on her watch even as she’s grappled with the almost 29 million vehicles recalled in North America, including 2.59 million compact cars with potentially faulty ignition switches linked to at least 13 deaths. GM shares, as of Tuesday, have gained 6.2 percent since the small-car recalls began in February.
“From a legal, fiduciary, protecting-the-franchise standpoint in the congressional testimony environment, I thought she was phenomenal,” Adam Jonas, an analyst with Morgan Stanley, said Tuesday in a telephone interview. “She navigated a minefield in a way that was really, really good.”
While recall headlines have dominated in the U.S., sales have increased, rising 2.5 percent through June. The total U.S. market rose 4.3 percent during the same period. GM’s results have been helped by new SUVs such as the Cadillac Escalade, which rose 18 percent in the first half, and GMC Yukon, which gained 54 percent. The Buick brand, helped by the new Encore small SUV, rose 13 percent.
The sales gains come as GM reduces its spending on incentives, according to researcher Autodata Corp. The average spending per vehicle on light-duty trucks fell 10 percent during the first half while Ford Motor Co.’s truck spending rose 2.3 percent.
“We expect GM results to improve markedly in 2Q, as the profit impact of transitioning to a new line of full-size ‘heavy-duty’ pickup trucks and large SUVs goes from a modest headwind in 1Q to a significant tailwind in 2Q,” Ryan Brinkman, an analyst at JPMorgan Chase & Co., wrote in a note to investors.
Encouraged by the second quarter, some analysts such as Itay Michaeli of Citigroup Inc. expect GM will forecast an accelerating second half. Second-quarter earnings per share may slide by almost a third to 58 cents. The company projected a $1.2 billion charge in the quarter for recalls.
“If you set aside the ignition-switch disaster, GM has produced an array of cars that people really like,” said Erik Gordon, a professor at the Ross School of Business at the University of Michigan in Ann Arbor. “It’s hard to remember that because the ignition recall is such a disaster.”
Truck production, including light- and heavy-duty pickups and large SUVs, rose 18 percent through June compared to a year ago to reach the highest level since the fourth quarter of 2007, estimated Brinkman. GM built more Cadillac Escalades than in any quarter since the first three months of 2008, he wrote.
Average transaction prices on the Escalade “are through the roof,” he wrote. “We expect ‘Suburban-sized’” North American profits excluding recall costs, he said, referring to the large Chevrolet SUV.