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Pricey truck sales boost GM earnings despite lower volumes

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Strong demand for pricey, high-end trucks in North America boosted General Motors' earnings, offsetting lower car sales, especially in China, the company announced Thursday.

[NEW YORK] Strong demand for pricey, high-end trucks in North America boosted General Motors' earnings, offsetting lower car sales, especially in China, the company announced Thursday.

The biggest US carmaker reported slightly higher second-quarter profits, and highlighted the launch of upgraded pickup truck models aimed at the American market, where the economy is strong and demand has held up.

The result was a record average price of US$37,126 in North America in the quarter, boosting operating income in the region even as the number of vehicles sold in the quarter fell there and in other markets.

GM has also cited lower costs following a reorganisation announced in late 2018 that cut thousands of jobs and closed factories, drawing criticism from politicians from across the political spectrum.

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"We're really starting to see the earnings potential of the truck enterprise," said GM chief financial officer Dhivya Suryadevara.

The results came as Moody's lowered its outlook to "negative" on the global automotive market, projecting lower sales in 2019 and 2020 and citing "further weakening in demand in Western Europe and in China, which was affected by the ongoing US-Chinese trade talks."


Net income rose to US$2.4 billion, up 1.2 per cent from the year-ago period.

But revenues fell 1.9 per cent to US$36.1 billion, as global vehicle sales dropped 6.1 per cent, a decline of more than 125,000 cars.

In North America, GM vehicle sales fell four per cent, clipped in part by lower inventories of some trucks as the company rolls out the updated models.

Ms Suryadevara described the launches as "cadenced," aimed first at the light-duty pickup market where vehicles endowed with state-of-the-art connectivity and other features command prices of US$45,000 and higher. GM's market share in this segment rose during the quarter.

The carmaker plans to unveil heavier pickup truck models through the rest of 2019 and into 2020, as well as make available more light pickups at lower prices.

Ms Suryadevara shrugged off analyst concerns that truck launches by Fiat Chrysler and other automakers will dent these profits, pointing to the strong US economy and the age of the fleet being replaced.

"We think the fundamentals remain strong, especially in the truck market," Ms Suryadevara told reporters on a conference call.

The company suffered a 12.2 per cent drop in vehicle sales in China, where demand was dampened by the slowing economy and pricing pressure. GM, which had previously projected flat auto sales this year in China, now projects a decline.

Ms Suryadevara said the company reduced vehicle inventory by about 10 per cent in China and took other measures to reduce costs.

The company plans a series of vehicle launches in China in the second half of the year that should sell well, but Ms Suryadevara said macro conditions remained challenging.


GM's autonomous vehicle division, Cruise, last month pushed back the timeframe for commercial deployment of self-driving taxies, which had originally been targeted for 2019.

Chief executive Mary Barra said she is "very pleased" with the venture's progress but needs more time to work on the technology, address regulator questions and build public support for the enterprise.

GM plans to launch a publicity campaign to explain the project in San Francisco, where the cabs will launch.

"You're going to see us have a marketing campaign to engage the city so they know what's coming," she said on a conference call with analysts.

"I wouldn't say there's impediments. There's just work that needs to be done."

GM confirmed its full-year profit forecast following the results, which topped expectations.

Shares of GM gained ground following the earnings, but finished down 0.5 per cent at US$40.15, outperforming the overall market after US President Donald Trump announced new tariffs on Chinese goods.