GM profits plunge on recall costs
DETROIT - General Motors' (GM) profits are falling, showing that a string of vehicle recalls and the cost of compensating victims hurt or killed because of a defective part in millions of its cars is taking a toll.
General Motors said Thursday that its second-quarter earnings fell 85 percent, as recall costs chopped $1.5 billion from the bottom line. The automaker posted a net profit of $190 million, or 11 cents per share, including restructuring and recall-related expenses.
A year ago GM made $1.26 billion, or 75 cents per share. Without one-time items GM would have made 58 cents per share, equaling Wall Street's expectations. So far this year GM has recalled almost 30 million vehicles, a company record.
GM shares were down 2 percent, to $37.41, in pre-market trade.
GM took a number of pretax charges tied to the recalls. They include $400 million to compensate victims of ignition-switch related crashes; $874 million to account for recall expenses during the next 10 years; and $1.2 billion for recalls announced during the quarter. The after-tax impact of those items was $1.5 billion.
"Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid new vehicle launches," GM CEO Mary Barra said in a statement.
GM has recalled more than 29 million vehicles worldwide, including 25.5 million in North America, because of a range of mechanical troubles. On Wednesday that company issued an additional six recalls covering roughly 718,000 vehicle in the U.S., with problems including faulty seats, incomplete welds on seat brackets, turn signal failures, power steering failures and other issues.
GM says 13 deaths and more than 50 accidents stemming from defective ignition switches in Chevrolet Cobalts and other vehicles.
Attorney and compensation expert Kenneth Feinberg announced in June that GM would offer at least $1 million in compensation for people killed or injured in accidents caused by faulty ignition switches.