DETROIT — General Motors earned $1.1 billion, or $1.29 per share in the second quarter, beating Wall Street expectations as surging sales of large pickups, SUVs and crossovers in the U.S. more than offset slowing growth in China.

DETROIT — General Motors earned $1.1 billion, or $1.29 per share in the second quarter, beating Wall Street expectations as surging sales of large pickups, SUVs and crossovers in the U.S. more than offset slowing growth in China.


The performance was much stronger than the $190 million GM earned in the second quarter of 2014 when it took a $400 million charge related to an unprecedented wave of recalls, including an ignition switch defect.


Investors liked what they heard as GM shares were trading at about $31.57 midday Thursday, up $1.27, or 4.2 percent from Wednesday’s close.


Chief Financial Officer Chuck Stevens said GM expects second-half pre-tax profit to be even stronger than the $5 billion in the first six months of the year.


But the company has now expensed $625 million to cover the cost of the Ignition Compensation Fund, which has found 124 deaths caused by the defect. That cost is slightly above the $600 million high-end of the range GM previously forecast. Of that, the fund, administered by outside attorney Kenneth Feinberg, had paid $280 million as of July 17, according to a GM filing with the Securities and Exchange Commission.


"The first two quarter of the year were strong as we fully capitalized on a robust North American market and maintained our strength in China, despite the challenging conditions in that market," said CEO Mary Barra in a statement.


Global sales fell 3.5 percent to $38.2 billion from $39.2 billion a year earlier, reflecting the strength of the U.S. dollar. A strong dollar reduces the value of sales from Europe and other regions when euros and other currencies are translated to dollars.


Once again North America accounted for the bulk of GM’s profits. It earned $2.8 billion in its home region, about double the $1.39 billion of a year earlier. Its pre-tax profit margin in North America was 10.5 percent, up from 5.4 percent a year earlier.


GM and other automakers are benefiting not just from a strong market but from the shift by many consumers from smaller, moderately-priced vehicles to large, fully equipped and higher priced pickup trucks, SUVs and larger crossover vehicles that yield larger profits. The average selling price of a GM vehicle was $37,121, according to Kelley Blue Book, more than $400 higher than in the second quarter of 2014.


If there was any hint of worrying news from the U.S., it was that profits were reduced by about $300 million from returned rental cars that sold for lower-than-expected prices at auctions.


In China, where stock markets have fallen more than 30 percent since mid-June after a bubble-like rally over the previous year, GM still earned $1 billion from its joint ventures and boosted its pre-tax profit margin to 10.2 percent from 10 percent a year earlier.


Stevens said GM was able to reduce the negative impact of the stock market decline by selling more SUVs such as the Buick Envision and Baojun 560. These models generally sell for higher prices in China than comparably sized passenger cars. But the automaker and its partners did reduce prices on some models in China by as much as 20 percent.


GM plans to invest $14 billion to expand production and launch new vehicles in China.


"Our view, long-term, on China hasn’t changed." Stevens said. "In the next 10 to 15 years this market is going to be a 35-million unit a year industry."


To put that in perspective, U.S. consumers are on track to buy about 17 million new cars and trucks this year, which would be the industry’s best year in more than a decade.


Outside North America and China, GM still has work to do.


GM narrowed its loss in Europe to $45 million from $305 million. It still expects to make a profit in Europe next year for the first time this century. In South America GM lost $144 million, worse than the $81 million it lost a year earlier.


Reflecting the difficulties in that market, GM took $720 million in charges tied to devaluation of the Venezuelan currency, the bolivar, and a writedown of its assets.


In its International Operations, which includes China, India, South Africa and the Middle East, GM made $349 million before taxes, up from $315 million in 2014’s second-quarter.


———


(c)2015 Detroit Free Press


Visit the Detroit Free Press at www.freep.com


Distributed by Tribune Content Agency, LLC.