Can GM’s Big Market Performance Outweigh the Bad?
General Motors Co. (NYSE:GM) continues to flex its muscles in the world’s two largest auto markets, China and the U.S. However, weaknesses in Southeast Asia and other international markets are dragging on the company. Following its second-quarter earnings report from Thursday, concerns over the international unit could keep doubts in investors’ minds.
CEO Dan Akerson opened the conference call with analysts Thursday with good news front and center, and it mainly has to do with Cadillac and Chevrolet, the company’s star brands. Noting Chevrolet’s “record global sales in the second quarter,” Akerson said the company posted its 11th consecutive quarter of year-over-year sales improvements.
While GM’s truck segment is getting a boost from the Chevy Silverado and GMC Sierra, Akerson sees more potential for the coming year as construction in the U.S. continues to accelerate. Akerson noted the positive feedback for the pickup’s new Crew Cab feature, yet he reserved a great deal of enthusiasm for the Cadillac division, specifically the ATS and XTS.
“These two products made Cadillac the industry’s fastest-growing brand in the first half of the year, with sales up more than 33 percent,” Akerson said in the conference call. GM’s chief executive also hinted at the potential for Cadillac in Asia, now that the company has started work on its plant in Shanghai.
“This plant is a lynchpin of our strategy to triple Cadillac volumes by 2015 and achieve 10 percent share in the Chinese luxury segment by the end of the decade,” said Akerson. For him, the strength in the largest markets was reason for optimism, while he saved the bad news coming from Asia for Chief Financial Officer Daniel Ammann.
Ammann noted the increase in automotive operations net cash and the decline of $300 million to $1.2 billion in total revenue for the second quarter. GM’s chief financial officer pointed out improvements in South America despite the impact of exchange rates. Currency manipulation was another reason for GM’s struggles in Asia.
“Challenges with competitive pressure as a result of the yen, particularly in Southeast Asia” were behind the sluggishness in Australia and other markets, Amman told reporters at GM headquarters later in the day, according to Automotive News. Those challenges are expected to continue. Surprisingly, GM did better in Europe than analysts had predicted.
“In Europe, lower cost, higher volumes in United Kingdom and strong new vehicles like the Opel/Vauxhall Mokka helped narrow our year-over-year loss,” Akerson told analysts during the call. He also noted that pushing forward with this strategy would be the future of GM on the European continent. Akerson framed the report in an overall positive light.
“These are just a few examples of our progress, but I chose them because they show that GM is inherently stronger company than it was even a year ago.” Akerson noted the impressive score (95) of the Chevy Impala in a J.D. Power Appeal Study, which he said puts it on par with a Tesla (NASDAQ:TSLA) Model S.
GM’s brand perception is improving worldwide, but the company will have to perform better abroad, especially in Southeast Asia, in order to appeal to investors for the long term. The new phase of Cadillac production in Shanghai will help.