Trucks, SUVs steer GM to huge profit gain

Big profits from trucks and SUVs helped General Motors overcome a sales slowdown in China, economic problems in Venezuela and payments to ignition-switch crash victims as the automaker’s second-quarter net income rose sixfold to nearly $1.12 billion.

The Detroit company made 67 cents per share from April through June compared with 11 cents a year ago. The year-earlier quarter included $1.5 billion in expenses for a string of safety recalls. GM’s $2.8 billion pretax profit in North America was a second-quarter record.

The company said the SUV and pickup sales were highly profitable since they bring in more dollars per vehicle. Kelley Blue Book estimated GM’s average U.S. selling price at $37,025 for the quarter, up 3.3 percent from a year ago.

“Our SUV sales across the business are up more than 80 percent,” said Chief Financial Officer Chuck Stevens.

The GM plant in Arlington, the only GM facility to produce full-size sport utility vehicles, played a crucial role in boosting the bottom line since the plant builds Chevrolet Tahoes and Suburbans, GMC Yukons and Yukon XLs and Cadillac Escalades. Because of the brisk sales, the plant’s 3,800 hourly workers are working three shifts to meet demand.

Earlier this month, GM announced it would spend $1.4 billion to renovate and expand the Arlington plant, reconfiguring its space with a new paint shop, body shop and general assembly area. Construction is expected to begin this summer and take about three years to complete.

And in another sign of support for the Arlington plant, last fall GM opened a stamping facility as part of a $530 million expansion and overhaul to prepare for the new SUV models. That followed a $331 million body shop expansion and retooling.

Excluding $1.1 billion in special items, GM made $1.29 per share, handily beating the $1.08 average of seven analysts surveyed by Zacks Investment Research. Among the special items were $720 million for currency devaluation and asset write-downs in Venezuela and $75 million to compensate ignition switch crash victims.

The strong profits helped GM distance itself from the recalls, although the company raised its estimate for what it will spend to compensate victims of crashes caused by defective ignition switches from $600 million to $625 million. Stevens called it a final estimate, although GM faces lawsuits and potentially a big penalty from a Justice Department criminal investigation.

Faulty ignition switches that can unexpectedly shut off engines in older GM small cars are responsible for at least 124 deaths and 269 injuries, according to a fund set up by the company to compensate victims.

In China, GM introduced two new SUVs during the quarter, helping to boost sales, Stevens said. The company also cut costs and became more efficient in China, where it will continue to invest in new products despite slowing growth, he said.

GM shares rose $1.20 to $31.50 in trading early Thursday.

This story contains material from Associated Press and the Star-Telegram archives.

This story was originally published July 23, 2015 at 10:35 AM with the headline "Trucks, SUVs steer GM to huge profit gain."