General Motors has revealed its second-quarterly revenue performance for 2014, which unsurprisingly does not make for the most reassuring reading. Having been hit with a bill far in excess of $1.2 billion following an unprecedented spat of vehicle recalls, total Q2 income came in at a comparatively paltry $200 million.
By contrast, the same three-month period in 2013 saw GM come out with $1.2 billion – at the time facing a recall bill of just $100 million.
The bad news doesn’t end their either as on top of the funds already forked out in the wake of such gigantic recalls, GM execs tipped a further $400 million bill to pay compensation to those affected by the spate of faulty ignition switches that were linked to several serious accidents. This is the first time the automaker has put an estimate on how much it expects to pay out in compensation, though admitted that without a cap on the figure it might go as high as $600 million.
On a slightly more positive note however, total revenues for the quarter were in fact up a little compared to last year. Q2 2014 brought GM total income of $39.6 billion as opposed to the $39.1 billion of last year, suggesting that the world’s confidence in the brand may not have been shaken quite so damagingly.
“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,” said Mary Barra, CEO of General Motors.
According to Brian Johnson of Barclays, the global recall nightmare GM has faced over recent months is already being forgotten by the masses, paving the way for a bright and stable future.
“The recall is increasingly fading to the background,” he said, insisting that investors were likely to look more at the firm’s improved overall revenues than the unfortunate recall bill.
For the crucial North American market, GM’s pre-tax earnings came out at $1.4 billion after factoring in the $1 billion cost of domestic recalls issued. This is of course a marked decline from the $2 billion receded last year, though remains impressive given the turbulence GM has experience this year so far.
As for the future outlook, GM is confident that things will return to normal by way of both recall costs and revenues throughout the rest of the year, though didn’t go so far as to make public any exact targets or projections. There are those however that insist it is simply unfeasible to assume that overall GM vehicle sales will not be adversely affected by the negative global publicity the spate of recalls triggered.
“GM is going to take a hit because of the recalls that have been happening over the last several months,” warned Kelly Blue Book analyst Akshay Anand .
“The question is, how much? Sales haven’t slowed as much as many people expected, thanks in part to a clear recall strategy from GM as it relates to public perception, as well as the introduction of solid, new product.”