GM Drives Up Early Gains
Tuesday, July 31, 2007SUSIE GHARIB: High octane earnings from General Motors today, as it reported its third consecutive quarterly profit. GM had net earnings of $1.56 a share in the second quarter. That was $0.43 above analysts' estimates and a stark contrast to its year ago loss. Earlier today, Diane Eastabrook talked to GM Chief Financial Officer Fritz Henderson and began by asking him if the auto maker is on target to turn a profit for the year.
FRITZ HENDERSON, CFO, GENERAL MOTORS: Well, I will confine my comments to the second quarter, I think. It was a quarter of progress. Automotive business improved on an operating basis, if you will, $400 million. The automotive business in the black. All four of our regions in the black, albeit North America break even, GMAC profitable in the quarter, good to see, so some positive signs. We were encouraged by them. But I would say it's just a quarter. So obviously we have more to do to achieve our goals for this year.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: You still have a loss in North America although it was a smaller loss than we've seen in previous quarters. What continues to be the problem in North America?
HENDERSON: The essential part of north America is we're breaking even. It's good from where we have come, if you will in terms of the level of profit improvement. But the truth is, is that we need to do more in the area of cost reduction. We need our products to continue to hit the market well. We need to execute our sales and marketing strategy and then finally, health care remains a pretty significant dragon in the overall profitability of the business. So we just need to do more of what we have been doing to bring our North American business to where it needs to be as part of our overall transformation.
EASTABROOK: But you did say earlier that you still need to reduce your costs. Is that something that needs to be accomplished internally or is that something that should be accomplished through a new union contract?
HENDERSON: I'm not going to talk about what we need to do at the table. I really think that's best confined to the bargaining table. I would say we need to find solutions that can allow GM to be competitive, continue in transforming our business to make it successful and allow us to grow globally. We need to generate profitability and cash flow from our business because we have substantial investments we need to make across the board for product as well as the technology. In the end, we need to do it in a way that's respectful of the needs of our people and our unions. And so that's what the bargaining is all about.
EASTABROOK: You did announce yesterday that you were going to be offering some incentives on some of your larger pickup trucks. Is that a reflection of high fuel prices, the stagnant housing market or perhaps both?
HENDERSON: Actually it's primarily a reflection of competitive activity. We have a great product. We just recently launched industry leading fuel economy, great pay load characteristics, just a finely style truck, great interiors. But the truth is, there is good competition too. And frankly the competitive environment was intense and we needed to react. Our market share through May was very strong in pickups. In June we took a hit and frankly the level of competitive activity stepped up. We didn't necessarily respond as aggressively as we wanted to. We just decided that we needed to get back and become more competitive in the pickup truck business, which we announced yesterday.
EASTABROOK: There is also some speculation that Toyota may become the number one U.S. auto maker this year or perhaps even the global auto leader this year. Psychologically, what impact is that having on General Motors?
HENDERSON: My view is we got to get the job done at General Motors. From the standpoint of this race, you never like to lose a race. But on the other hand, I actually think that this is a very long-term game. It's about getting our business turned around. It's about growing globally. It's doing what we need to do. I look at things like profitability, cash flow, market capitalization in there. It's clear that we've got a long way to go to try to close the gap with Toyota.
EASTABROOK: Mr. Henderson thank you very much for joining us this evening.
HENDERSON: Thank you Diane.
