GM down, Ford up as Q2 earnings arrive
BY BARRY PARK | 25th Jul 2014
The American car-making giant overnight posted a $US190 million profit for the second quarter of 2014 – an 85 percent dive compared with the first quarter – as its recall woes, which last week were linked to even more deaths in the United States, rolls on.
Significantly, GM also posted a $US200 million bill for restructuring costs, some of which flows through to its decision to quit Australian car-making from late 2017.
According to the car-maker’s filings, Singapore-based GM International Operations, which oversees Holden’s operations, recorded charges, interest accretion and other revisions to estimates for separation programs in Australia, Korea and Chevrolet Europe costing $US390 million, and affecting 3350 employees.
“We expect to complete these programs in 2017 and incur additional restructuring and other charges of $US440 million,” GM’s financial statement submitted to the US Securities and Exchange Commission said.
GMIO spun a small $US83 million profit for its US parent after what it said was a difficult period, with earnings falling by a quarter to $US3.6 billion.
“We are addressing many of the challenges in our GMIO operations and have strategically assessed the manner in which we operate in certain countries within GMIO, including our cost structure, the level of local sourcing, the level of investment in the product portfolio, the allocation of production activity to the existing manufacturing base and our brand strategy,” GM said.
“These strategic reviews considered the effects that recent and forecasted deterioration in local market conditions would have on our operations.
“While we are continuing our strategic assessments, we have taken certain actions and incurred impairment and other charges in 2013.”As well as closing down its Australian operations, GM is still buried deep in South Korea’s court system as it fights unions over employee-related wage claims and entitlements that date back to 2010.
Of note, though, was the fact that GMIO lost $US200 million while hedging against currencies in the regions in which it operates, including the falling Australian dollar.
The amount of advertising that GM spent in the region also fell by about $US100 million, the document shows.
Ford, meanwhile, posted a $US1.3 billion second-quarter profit, beating analysts’ expectations and improving its result over the same quarter last year by $US78 million.
In a surprise, Ford’s troubled European division returned a profit for the car-maker, although like GM, the car-maker lost money via its South American operations.
No mention was made in the company’s publicly filed documents relating to the closure of its Australian operations, which are due to receive a $US300 million boost.
However, Ford Australia’s documents filed when it announced a $267 million loss earlier this year reveal that the car-maker’s local division is expected to gain another $US300 million top-up from its US parent in this quarter.
Ford’s US division, and its Asia Pacific branch bolstered mainly by growth in China, both posted strong results for the car-maker.
“Our One Ford plan continues to deliver, enabling us to reach our 20th consecutive quarter of profitability,” Ford chief executive Mark Fields said in a statement.
“Moving forward, our commitment is to build on this success by accelerating our pace of progress, while delivering product excellence and driving innovation in all areas of our business,” he said.
While GM has downgraded its full-year profit potential based on its troubled second-quarter result, Ford has said it is likely to either meet or exceed its earnings expectations.
