General Motors’s less-than-expected loss in Europe helped the company post a $1.2 billion second-quarter profit. It indicates the automaker’s European turnaround efforts are well under way, and mirrors improvements that Ford Motor Co. is seeing in the economically troubled region. However, GM is more cautious about the outlook for Europe.
Like Ford, GM’s second-quarter loss narrowed in Europe. GM lost $110 million before interest and taxes, compared to $394 million in the same period a year ago.
Lower costs, higher sales volumes in the United Kingdom and new vehicles such as the Opel Mokka are helping trim losses there, GM Chairman and CEO Dan Akerson told analysts in a call.
“We’re pleased, not satisfied,” he said.
Ford recently revised its projected loss this year in Europe to $1.8 billion, down from an earlier estimate of $2 billion. GM didn’t change its estimate for projected regional losses of slightly less than last year’s $1.9 billion.
GM, which wants to break even in Europe by mid-decade, has lost $285 million in Europe during the first six months of 2013. That’s $403 million better than the first half of last year, a nearly 59 percent improvement.
While Ford’s executives pointed to signs of stabilization in Europe, GM leadership wouldn’t go that far.
“Our view is that it’s still a very challenging environment and it’s too soon to call any sort of improvement there,” GM Chief Financial Officer Dan Ammann told reporters.
Ammann said GM is making good progress in Europe despite the economic environment.
“The demand-driven recovery is not in sight yet,” Akerson said. “So we have to keep working on cost, complexity and brand-building.”
GM expects second-half seasonal patterns such as production downtime and pricing pressures to hinder its performance in Europe during the last six months of the year.
GM’s second-quarter improvement was noted by analysts. Citi Investment Research auto analyst Itay Michaeli in a Thursday research note called it “very encouraging.”
Many analysts were expecting losses of more than $300 million for GM Europe in the quarter.
GM’s overall net income was down slightly in the second quarter from $1.5 billion earned a year ago, but it beat analyst estimates when factoring in special items that cost about $200 million. Analysts were expecting earnings of 75 cents a share, down from 90 cents a share in the same 2012 quarter. GM made 84 cents when including 9 cents of special charges, mostly related to costs of acquiring GM Korea preferred shares.
The Detroit-based automaker’s profit center remains North America, where it made $2 billion before interest and taxes, up from $1.9 billion during the period a year ago. That was due to a stronger market overall and sales of large pickups, which were up 23 percent through June. The results from its homefront helped the company post its 14th-straight quarterly profit.
Ammann hinted that second-half results could be even better for GM in North America. The company is launching 20 new or significantly refreshed vehicles in the U.S. this year.
Revenue for second quarter rose 4 percent to $39.1 billion, up from $37.6 billion.