GM Reports Preliminary Second Quarter Financial Results, Beats Estimates

[coaster.n3rd]

GM Reports 2Q Profit of $891M

* Record automotive revenue of $45.9 billion
* Reported net income of $891 million, adjusted net income of $1.4 billion
* Adjusted automotive operating cash flow of $1.1 billion
* Improved liquidity position of $27.2 billion

DETROIT - General Motors Corp. (NYSE: GM) today released its preliminary financial results for the 2007 second quarter, marked by record automotive revenue driven by strong sales in key growth markets, improved net income, and solid operating cash flow.

AP News here

Also GM's official release here

Jalopnik's release here

JALOPNIK: So, they had "adjusted net income of $78 million" and a "reported net loss from continuing operations of $39 million?" Which one is it? Well, whatever it is, even in the short term, if anyone thinks the General's out of the woods, think again. Things will get dicey tomorrow yet again, as Edmunds is predicting July US sales for the big ol' automaker from Detroit to be down 18% when those numbers are announced.

[Perian]

IT'S VERY IMPORTANT TO REMEMBER ONE LITTLE DETAIL HERE BEFORE THE "WAY TO GO GM", "WE KNEW YOU COULD DO IT" POSTING FEAST BEGINS...

If you look at the dealer stock levels of SUVs and Pickup Trucks, it is clearly evident that GM has been over producing vehicles during the first six months of this calendar year. Big deal you say? Read the following from Business Week:


And it's worth noting that GM can make profits upwards of $10,000 on each big truck, vs. next to nothing on some of its sedans.

Since GM books a sale as soon as a vehicle leaves the factory, revenue was bound to jump.


Don't be fooled: June sales (and probably July's also) tell us that GM must begin to consider production cuts in their main money making lines of vehicles.

The profit party may be coming to a quick end.

This surprise profit level is sure to be looked at as an anomaly just a few months from now.


Oh, and by the way; the announcement couldn't have come at a worse time - as far as the UAW contracts go.

.

[Buick61]

Originally Posted by Perian

IT'S VERY IMPORTANT TO REMEMBER ONE LITTLE DETAIL HERE BEFORE THE "WAY TO GO GM", "WE KNEW YOU COULD DO IT" POSTING FEAST BEGINS...

If you look at the dealer stock levels of SUVs and Pickup Trucks, it is clearly evident that GM has been over producing vehicles during the first six months of this calendar year. Big deal you say? Read the following from Business Week:


And it's worth noting that GM can make profits upwards of $10,000 on each big truck, vs. next to nothing on some of its sedans.

Since GM books a sale as soon as a vehicle leaves the factory, revenue was bound to jump.


Don't be fooled: June sales (and probably July's also) tell us that GM must begin to consider production cuts in their main money making lines of vehicles.

The profit party may be coming to a quick end.

This surprise profit level is sure to be looked at as an anomaly just a few months from now.


Oh, and by the way; the announcement couldn't have come at a worse time - as far as the UAW contracts go.

.

Let's see.... Bold? check. Italics. Check. Underlining. Check. Pointless trailing dot. Check. A series of short, telegram-like pontifications? Double check. Ah Perian...how ever did I read the news before you were here to properly interpret it for all of us?

More, here: http://money.cnn.com/2007/07/31/news...ex.htm?cnn=yes


I disagree with you. GM may count sales when the vehicle is produced, but I don't think the SEC would be to happy with GM if it was counting phantom money. In other words, they can't say they had X revenue when no actual money came into the corporation. That seems like fraud to me.

[alveress]

Hey everyone,

I have been reading GMinsidenews for some time now. Finally decided to join up and voice my opinions, and or add to the conversations.

Anyway, back on topic.

I personally think GM has increased production because of the UAW contract negotiations. If you think about it, if there is a strike, GM has the cars, and trucks to keep things going. . .for a while anyhow.

About the profit, well even if GM is counting its production and not sales (which for some reason I believe this is not how it is done) Then it is still an improment over past quarters. It is safe to say that GM has not changed how it counts its profit (in the past two years) So it is safe to say that a 800 mill profit is better than a 10 billion loss correct?

Just my thoughts.

[HoosierRon]

So let's see. Average Joe GMI poster has cracked the scam, but the UAW negotiators will be unable to comprehend that GM really is not making money. They will insist on huge pay raies because of press releases. Boy, I'm worried.

If you look at the dealer stock levels of SUVs and Pickup Trucks, it is clearly evident that GM has been over producing vehicles during the first six months of this calendar year.

Why is that "evident"? Why can I not conclude that inventories are high because production is the same but sales are down?

Things will get dicey tomorrow yet again, as Edmunds is predicting July US sales for the big ol' automaker from Detroit to be down 18% when those numbers are announced.

If production is static, then GM's practice of booking sales when vehicles leave the factory would not explain GM's improved financial position.

[HoosierRon]

Despite industry pressures in Germany, Europe's largest vehicle market, GME set a quarterly sales record of 574,000 units, up five percent over the second quarter 2006....

Chevrolet had record sales of 115,000 units, up 34 percent. GME growth in key Eastern European markets was strong, especially in Russia, where unit sales were up 106 percent over the second quarter 2006, and share was up 3.9 percentage points.

GM Asia Pacific (GMAP) recorded adjusted net income of $237 million in the second quarter (reported net income of $227 million), which marks a second-quarter net income record for the region....

GM enjoyed eight percent sales growth in the Asia Pacific region, and GM China set a new volume record with 234,000 units in the quarter, up over six percent year-over-year.

GM sales in South Korea were up 20 percent, and India was up 46 percent aided by the success of the newly-introduced Chevrolet Spark....

GMLAAM set a volume record for the quarter, selling over 293,000 units, up 20 percent year-over-year. GM sales performance was highlighted by an all-time sales record in Venezuela, and second quarter records in Argentina, Brazil, Chile, Colombia, Egypt, and the Middle East Operations.

Yeah, its just a shell game.

[5 watt]

When they make a vehicle it has been sold, to the dealer. When GM gets the money would depend on there payment agreements with there dealers. It’s not like they are doing what Chrysler did and make vehicles that the dealers didn’t want and just put them in a parking lot.

The good news is that GM is very close to braking even in NA.

[jlmartin99]

Originally Posted by Perian

IT'S VERY IMPORTANT TO REMEMBER ONE LITTLE DETAIL HERE BEFORE THE "WAY TO GO GM", "WE KNEW YOU COULD DO IT" POSTING FEAST BEGINS...

If you look at the dealer stock levels of SUVs and Pickup Trucks, it is clearly evident that GM has been over producing vehicles during the first six months of this calendar year. Big deal you say? Read the following from Business Week:


And it's worth noting that GM can make profits upwards of $10,000 on each big truck, vs. next to nothing on some of its sedans.

Since GM books a sale as soon as a vehicle leaves the factory, revenue was bound to jump.


Don't be fooled: June sales (and probably July's also) tell us that GM must begin to consider production cuts in their main money making lines of vehicles.

The profit party may be coming to a quick end.

This surprise profit level is sure to be looked at as an anomaly just a few months from now.




Oh, and by the way; the announcement couldn't have come at a worse time - as far as the UAW contracts go.

.

Greetings Perian,

I have not posted for a period of time due to topics were not of much interest, but this topic is worth noting. Your comments noted, this pre-announcement regarding GM's 2Q results declares a very simple fact when compared to one year ago, in my view. There is over a $3 Billiion dollar financial reporting difference to GM's gain from one year ago.

Clearly, GM has much more work to do, but it is proper at this time to recognize what has been accomplished and the direction GM is going in and it appears it is in the right direction compared to where they were a year ago.

I for one understand business transformations the size, market and complexity of GM and they are not a quarter to quarter event, but instead years. That said, there are milestones that can be measured and financial controls and performance are some of the key categories. GM's efforts have yielded results that are note worthy, but clearly the transformation continues. A year from now, two years from now, how will GM be positioned in the markets they choose to compete in? Time and their results will clearly tell us how successful GM's strategies and execution of those strategies are working.

There will be time to walk through all of the analysis of the current quarter in relationship to inventory versus sales versus profit versus discounts and so on. All important work to get through, but that being said, it is also important to understand this is just one in a series of stages in the business transformation of GM. The key indicators from my experience in evaluating business transformations, says GM executing its plans and positive results are materializing. Time will tell as to will this continue, but for this moment in time, GM has the momentum going its way and I hope it continues.

JLM

[Perian]

Originally Posted by jlmartin99

Greetings Perian,

I have not posted for a period of time due to topics were not of much interest, but this topic is worth noting. Your comments noted, this pre-announcement regarding GM's 2Q results declares a very simple fact when compared to one year ago, in my view. There is over a $3 Billiion dollar financial reporting difference to GM's gain from one year ago.

Clearly, GM has much more work to do, but it is proper at this time to recognize what has been accomplished and the direction GM is going in and it appears it is in the right direction compared to where they were a year ago.

I for one understand business transformations the size, market and complexity of GM and they are not a quarter to quarter event, but instead years. That said, there are milestones that can be measured and financial controls and performance are some of the key categories. GM's efforts have yielded results that are note worthy, but clearly the transformation continues. A year from now, two years from now, how will GM be positioned in the markets they choose to compete in? Time and their results will clearly tell us how successful GM's strategies and execution of those strategies are working.

There will be time to walk through all of the analysis of the current quarter in relationship to inventory versus sales versus profit versus discounts and so on. All important work to get through, but that being said, it is also important to understand this is just one in a series of stages in the business transformation of GM. The key indicators from my experience in evaluating business transformations, says GM executing its plans and positive results are materializing. Time will tell as to will this continue, but for this moment in time, GM has the momentum going its way and I hope it continues.

JLM

Point taken, thanks for a great post.

Once GM gets past the next few quarters, and with some help from the UAW and the housing market, things could be looking well for a while.

One can only hope.

[paul38469]

GM does not build any vehicle without an order, unlike what Chrysler was doing. Either a customer order or dealer order is required. Yes, the sale is booked for financial purposes once the order is filled, but they haven't increased production of unassigned units, or as far as I understand, production at all. So, this is not the reason for the improved position. It is true that they may be forced to cut production of GMT-900s if sales tank and that could hurt future quarters, but that is not what is going on here.

It is interesting to notice that they have made about or over $ 200 million in each global region except North America where they have made a bit less than that. I think that is a good sign. Particularly in Europe where they had been struggling. That points to the idea that the restructuring in North America will yield results, just as the painful restructuring in Europe has finally started to really gain traction. Things could change dramatically, especially in North America, depending on many factors, including gas prices, but there are some positives to see here in these results.

[Perian]

Originally Posted by Buick61

I disagree with you. GM may count sales when the vehicle is produced, but I don't think the SEC would be to happy with GM if it was counting phantom money. In other words, they can't say they had X revenue when no actual money came into the corporation. That seems like fraud to me.

As of 07-01-07 GM had 321,300** T900s* in stock, a 142** day supply based on the dismal selling rate in June. Last week 20,310** T900s were produced. Unless the 0%/60 incentive that was announced yesterday has a large effect, the inventory number will probably rise, even with the just concluded two week vacation period.

We also have to worry about Toyota and its Tundra. The fact that they have placed an "average incentive of $3500 and added dealer cash"** on the truck is a major concern. Unfortunately for us, they seem to be succeeding at buying market share.

Last week Toyota produced 5,684 Tundra units, or 272,832 on an annual basis. That's well above their stated sales goal of 200,000. I think GM is doing the right thing with the tepid response thus far, but fewer sales will be the likely result.

My point is, sooner or later, GM must slow T900 production and that will have a marked effect on profit performance.


*T900 = Silverado/Sierra line of pickup trucks.
**Source: Automotive News Data Center.

[Perian]

Update from The Wall Street Journal (wsj.com):

GM Swings to a Profit On Strong Overseas Revenue
By MIKE BARRIS July 31, 2007 8:10 a.m.

General Motors Corp. Tuesday said it swung to a profit in the second quarter amid strength in its international operations and momentum at its core North America automotive unit.

Shares of GM rose 5.8% in recent premarket trading to $34.50.

The largest U.S. auto maker, which launched an extensive corporate restructuring in 2005, reported net income of $891 million, or $1.56 a share, compared with a loss of $3.4 billion, or $5.98 a share, a year earlier. The latest results included charges of $520 million, or 92 cents a share, including $374 million associated with the bankruptcy and reorganization of GM's former parts-supplier unit, Delphi Corp., as well as the restructuring of its North American division. Year-earlier results included $4.3 billion in restructuring-related items.

GM had cash and liquidity of $27.2 billion, compared with $24.7 billion in the first quarter. Net sales and revenue fell to $46.81 billon from $53.9 billion. Automotive revenue rose to $45.9 billion from $44.9 billion. Wall Street had been looking for automotive sales of $44.45 billion, according to analysts surveyed by Thomson Financial.

GM Chairman and Chief Executive Rick Wagoner said improvements in sales, income and cash flow were driven by "the continued successful implementation of our business strategies."

"Our heavy commitment to key growth markets around the world really paid off in strong growth and earnings," he said. "In North America we continue to make progress with our focus on great new products, a disciplined sales and marketing strategy, and structural cost reduction, although profitability remains close to breakeven."

GM's results come as the auto maker's financial health remains under severe scrutiny. Although the company has cited significant progress in its attempt to cut costs, it is currently involved in closely watched contract negotiations with the United Auto Workers union, and GM is expected to push for major concessions. At the same time, the auto maker is struggling to boost sales in its core U.S. operation, and has recently been forced to increase sales incentives on its most-profitable pickup truck models. (See related article.)

Mr. Wagoner is under intense pressure to continue cutting costs, while also boosting revenue by riding a wave of growth in emerging markets, such as China.

On Monday, GM's finance arm, GMAC Financial Services posted a 63% drop in second-quarter net income amid continued losses at its Residential Capital LLC unit. Net income in the home-lending unit, in which GM still holds a 49% stake, fell to $293 million from $787 million, as revenue fell 20%, amid weakness in the U.S. housing market and mortgage industry. GM said it recognized $139 million in net income from GMAC.

GM's North American operations reported an adjusted profit of $78 million, compared with an adjusted loss of $94 million. Net sales fell to $29.57 billion from $30.85 billion. GM Europe posted adjusted net income of $236 million, up from $143 million. Net sales rose to $9.56 billion from $8.74 billion. Net income on an adjusted basis at GM Asia Pacific rose to $237 million from $164 million. Sales climbed to $5.45 billon from $3.78 billion. GM Latin America had adjusted earnings of $213 million, compared with $155 million. Sales rose to $5.45 billion from $3.78 billion.

GM, which in the first half of 2007 lost its position as the world's top-selling auto maker, has focused on profitable growth in emerging markets and boosting margins in the U.S. by cutting sales incentives and scaling back deliveries to rental-car fleets. GM, Ford Motor Co. and Chrysler Group have struggled under the weight of escalating labor costs and declining market share in the U.S. Last week, Ford posted its first profit in two years, helped by higher-than-expected global revenue and narrower North American losses.

[Perian]

More from The Wall Street Journal (www.wsj.com):

Article quote:

GM's incentives come as the auto maker closes out what is expected to be a disappointing month in terms of U.S. sales. The deals also come one day before the company reports second-quarter financial results, which could be hurt by a soft U.S. retail environment.

Joseph Amaturo, an analyst with Buckingham Research, said in a note yesterday that full-size trucks and sport-utility vehicles are "clearly GM's most profitable" vehicles, representing an estimated $7,000 to $10,000 in per-vehicle profit margins. He said sales and production of the vehicles will "come under pressure during the second half of 2007 and into 2008 as a result of higher fuel costs and the aging of the vehicle(s)." He also said "irrational incentives from competitors" could add extra pressure.

As of June 30, GM had 107 days' supply of pickup trucks and SUVS, or 30% more than it had in May, and 40% higher than the entire industry, according to Autodata Corp. Supply on such key vehicles as the Chevrolet Silverado pickup, Tahoe SUV and Suburban SUV is equivalent to 142 days, 124 days and 126 days, respectively. Ford, meanwhile, has 86 days' worth of F-Series trucks and 68 days of its Expedition SUVs, while Toyota has a mere 48 days' worth of Tundra.

The downturn in pickup sales comes as consumers feel pressure from high gasoline prices and a sustained slide in the housing market. Sales of pickups, which are among the most profitable in the industry and represent 16.5% of the market, according to research firm Ward's Automotive Reports, are heavily influenced by the construction industry.

At GM, the pressure on pickup sales and the need to boost incentives could damage the company's attempt to mount a turnaround in North American operations. Sales of the Chevrolet Silverado and GMC Sierra have declined about 2% in 2007, despite having been redesigned for the current model year. Sales of some of the company's full-size SUVs -- which share the same vehicle architecture as the pickups -- have also slumped this year, and inventories of the vehicles have ballooned as a result.

Complete article at link.

[PhishPhood]

Originally Posted by Buick61

Let's see.... Bold? check. Italics. Check. Underlining. Check. Pointless trailing dot. Check. A series of short, telegram-like pontifications? Double check. Ah Perian...how ever did I read the news before you were here to properly interpret it for all of us?

More, here: http://money.cnn.com/2007/07/31/news...ex.htm?cnn=yes


I disagree with you. GM may count sales when the vehicle is produced, but I don't think the SEC would be to happy with GM if it was counting phantom money. In other words, they can't say they had X revenue when no actual money came into the corporation. That seems like fraud to me.

No Perian is correct in all his qualifications of the announcement. There are two different sets of reporting statistics.

For the SEC and other financial analysts GM is required to report vehicles as 'sold' as soon as they leave the factory...even if they aren't sold to a final retail buyer yet. One difference would be the situation that Chrysler had 4th Qtr last year where it produced vehicles but shipped them to a storage location with no dealer orders on the books yet.

The monthly sales statistics which will be reported tomorrow is a different system. It's generated at the retail level by the various dealers based on first Retail Delivery Reports ( RDR's ). GM's financial situation are not affected at all by these reports.

[coaster.n3rd]

I'm not as concerned about sales as I am profits & losses. I think GM should look at it the same way. Build more vehicles like the Enclave, Outlook, Malibu, 08 CTS and profit will continue as they don't need to put incentives on them to move them.