In sign of strength, GM posts US$1.3b profit

General Motors Company said Thursday it made US$1.33 billion in the second quarter, a sign it's getting healthier as it prepares to sell stock to the public.

It was the second straight quarterly profit for the Detroit automaker, which made US$865 million in the first quarter, and sets the stage for GM to file paperwork soon to start the public stock sale process.

CEO Ed Whitacre said last week that the company was eager to sell shares in an initial public offering so it can end its dependence on the US government and pay off US$43.3 billion in bailout funds that were converted into a majority stake in the company.

Whitacre wants the company to shed its 'Government Motors' moniker because it's hurting sales and the company's image.

But it's unclear if the recent record of profits - US$2.2 billion for the first half of 2010 - is enough to convince investors.

GM lost US$88 billion in the five years before it filed for bankruptcy protection last June.

Although GM is performing well, the timing still isn't right for it to sell shares in the next few months because of the sputtering economy, said Scott Sweet, senior managing partner of IPO Boutique in Tampa, Florida, which advises investors on IPOs.

Several recent IPOs have been postponed because of concerns that they won't get a high enough share price, he said.

He also said the Obama administration is pressuring GM to sell prematurely to influence the November congressional elections. Last week, Whitacre said the elections are not being considered, and the government has repeatedly said GM is in charge of the sale timing.

"The numbers are good. You can't argue that," Sweet said. "There is a huge incentive to have an IPO of GM, but it also must work."

GM's second-quarter revenue totalled US$33.2 billion, up 5.3 per cent from the first quarter on growing sales in every region except Europe. In the US, GM saw strong sales of new and redesigned models like the Chevrolet Equinox wagon and Buick LaCrosse sedan.

loSing outside north america

Its North American unit, long a source of losses, has turned into a profit machine, making US$1.59 billion before interest and taxes in the second quarter, up 31 per cent from the first quarter. Profits from its international operations, which include China and Brazil but exclude Europe, dropped 42 per cent to US$672 million, and GM lost US$160 million in Europe.

Much of the North American profit came because it is getting higher prices for cars, trucks and crossovers.

For example, GM said buyers paid 11 per cent more, or US$3,000 on average, for crossovers than they did in the second quarter of last year.

Crossovers look like sport utility vehicles but are more efficient because they are based on car undercarriages.

GM said it earned US$2.55 per share for the quarter. It didn't report second-quarter results last year because it spent part of the quarter in bankruptcy protection, but on Thursday, GM said it lost US$12.9 billion in the second quarter of 2009, or US$21.12 per share.

So far, GM's results are a reversal of fortune from 2009, when it lost US$4.3 billion from July 10, the day it exited bankruptcy court, through December 31. Before the first-quarter results, GM hadn't reported a profit since the second quarter of 2007.

GM said it ended the quarter with US$32.5 billion in cash, down from US$36 billion in the first quarter.

GM has been working to streamline operations and slash costs. It has shed four brands, changed leadership and last week announced its US dealership network would number 4,500, about 25 per cent smaller than it was in early 2009.

GM is the last of the Detroit automakers to report second-quarter results. Ford Motor Co made US$2.6 billion, its fifth straight quarterly profit.

Chrysler Group LLC, which got US$15.5 billion in federal aid, narrowed its second-quarter loss to US$172 million.

- AP