GM second-quarter profit skids due to costs of recall
July 25, 2014, 12:05 am TWN
NEW YORK--General Motors (GM) on Thursday posted a sharp drop in second-quarter profit as the automaker took heavy charges for safety recalls and a compensation fund for victims of faulty ignition switches.
GM net profit dived 85 percent to US$190 million, missing analyst expectations. A year ago the company posted a US$1.26 billion profit.
Adjusted earnings per share of 58 cents came in a penny below estimates.
The largest U.S. automaker took a pre-tax net loss from special items of US$1.3 billion, and a US$1.2 billion charge mainly for recall-related repairs of vehicles.
It took a special charge of US$400 million for the ignition-switch compensation program.
“There is no cap on this program, but this charge is the company's best estimate of the amounts that may be paid to claimants,” GM said in a statement.
The company estimated the cost of the program could increase by US$200 million.
GM said it recalled about 22 million vehicles in the second quarter, bringing the first half total to roughly 29 million.