GM Second Quarter Profits Eviscerated by Recall Costs

GM Second Quarter Profits Eviscerated by Recall Costs

Despite strong underlying performance, recall-related costs continued to rip cash away from General Motors in the second quarter.

The company said today in a statement that earnings before interest and taxes were $1.4 billion, but attributed $1.2 billion in recall related expenses to a net income of only $200 million down from 1.2 billion in the same period last year.

Net revenue increased slightly by $500 million to $39.6 billion despite global deliveries remaining roughly the same at 2.5 million vehicles. In large part, the company attributed strong average transaction prices in the U.S., saying its average vehicle sale rose by about $3,000 this year compared to the second quarter of 2013. Were it not for the massive wave of recalls, the company would be in its fourth consecutive quarter of year-over-year margin growth.

“Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid vehicle launches,” CEO Mary Barra said in GM’s statement.

During the second quarter, GM recalled roughly 22 million vehicles for a total of about 29 million including the April, May and June. GM also said today that it is setting another $874 million aside for projected recall expenses over the next decade.

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