General Motors’ quarterly profit nearly doubled in the second quarter, beating expectations, as the top U.S. automaker took a larger share of sales globally and raised prices on its vehicles.
Coming out of bankruptcy, GM Chief Executive Dan Akerson and other executives said the company had stripped out enough costs to recession-proof the business so it could thrive even in a weak auto market. The industry's sales slump in the second quarter and the risk of a double-dip recession could provide the first major test for that claim.
"There is an increased level of uncertainty," GM Chief Financial Officer Dan Ammann told reporters. "But what we're trying to do, and what we've done successfully, is to configure the business with a low break-even point and a strong balance sheet so we can handle whatever scenario comes along."
Earlier in the week, they fell to their lowest level since the company's initial public stock offering last November as investors worried how GM will fare if consumers tighten their purse strings in the sputtering economy.
The U.S. automaker is pushing heavily into smaller, more fuel-efficient cars like the popular Chevrolet Cruze, but a good portion of its profit still relies heavily on sales of more profitable trucks in the U.S. market.
Net income in the second quarter rose to $2.52 billion, or $1.54 per share, from $1.33 billion, or 85 cents per share, a year earlier.
The earnings per share blew past the $1.20 analysts polled by Thomson Reuters I/B/E/S had projected on average.
Revenue rose 19 percent to $39.4 billion, above the $36.74 billion analysts had expected during a quarter in which U.S. auto sales hit a soft patch.
The results represent the second full quarter since GM's IPO and a restructuring intended to keep the largest U.S. automaker profitable through the industry's punishing boom-and-bust cycles.
GM emerged from bankruptcy in 2009 after a $52 billion taxpayer-funded bailout orchestrated by the Obama administration. The U.S. Treasury still owns 32 percent of GM's common shares.
The company boosted its second-quarter earnings before interest and taxes by $1 billion by pushing through higher prices on its vehicles globally.
GM's said its share of global vehicle sales rose to 12.2 percent in the quarter from 11.6 percent a year earlier.
GM reported profits in all its operating regions, including Europe where it has been struggling to restructure its Opel unit. It was the first time all four regions were profitable since the IPO.
However, those gains came as its Japanese rivals, led by Toyota Motor Corp, struggled with fewer vehicles to sell due to the earthquake in Japan in March.
Analysts worry that if the U.S. recovery hits a pothole in the second half, GM could be forced to raise incentives on its vehicles to lure shoppers. GM's first-quarter results were marred by heavy incentives, but the automaker dialed back those deals.
The automaker also faces a new challenge in the second half as Toyota and other Japanese automakers return to full production levels and look to make up lost ground in sales.
For the second half of the year, GM expects its adjusted earnings before interest and taxes to be "modestly" lower than the first half, but the full-year results to improve over 2010.
GM ended the quarter with total liquidity of almost $40 billion, up from $36.5 billion at the end of June. However, investors will likely have to wait on share buybacks or dividends as Ammann said the company's focus would be on maintaining its "fortress balance sheet" to reinvest in the business and withstand any economic shock.