General Motors' (GM 4.36%) second-quarter results surprised investors -- and not in a bad way. Despite softer sales and a dip in revenue, GM managed to post adjusted earnings per share of $1.64, blowing away the Wall Street estimate of $1.43.
Not all of the news was good, of course. But GM managed enough good news to more than offset the challenges it's still facing. Here are three numbers from GM's second-quarter earnings report that together give a pretty clear picture of where the company stands right now.
10.7%: Margin in North America
GM reported "EBIT-adjusted" earnings of $3.02 billion in North America on revenue of $28.3 billion. ("EBIT-adjusted" is GM-speak for earnings before interest and tax, minus any one-time items.) That translates to a 10.7% margin, and that's a very strong number in the current market. It flat-out beat the margins reported for North America on a similar basis by GM's old Detroit rivals: Fiat Chrysler Automobiles (FCAU) checked in with an 8.9% result, while Ford Motor Company (F 2.48%) managed just 7.1%.
How did GM manage such strong profitability in a quarter in which its U.S. pickup-truck sales were down sharply, and in which it was still ramping up production of all-new pickup models?
GM is still working to get production of its all-new pickups up to full speed. But it's making crew-cab models in good numbers, and they've been getting great prices. Image source: General Motors.
First, while GM's overall pickup-truck sales were down, retail sales of highly profitable crew-cab versions of its all-new 2019 trucks -- the first variants to get up to full production speed -- were up 12% over sales of their crew-cab predecessors in the second quarter of 2018. While supplies are still tight, GM has been getting very good pricing for its all-new pickups, and each of those sales was quite profitable.
Second, GM's still selling lots of its recently revamped crossover SUVs, and it's making good money on those sales as well. U.S. sales of GM crossovers as a group were up 17% in the second quarter, a substantial gain.
So, while GM sold fewer vehicles in North America in the second quarter versus the year prior, those sales were considerably more profitable, on average.
$235 million: Equity income from China
GM sold almost 754,000 vehicles in China in the second quarter, which sounds impressive -- but that was down 12.2% from the second quarter of 2018. The decline clobbered GM's equity income from its joint ventures with Chinese automakers, which fell to just $235 million from $592 million in the year-ago period.
What happened?
There are two stories here. First, China's new-vehicle market is in a slump, and that slump is affecting most of the automakers that do business there. But there's an additional factor putting pressure on GM's results: Its product line is dated.
Now, that's probably not a big deal in the grand scheme of things, because GM has a bunch of new products set to launch in China in the second half of 2019. But in the second quarter, GM sold fewer vehicles than it might have otherwise, even after discounting prices.
Long story short: GM made fewer sales in China, and discounts hurt margins on the sales it did make.
18.3%: Cadillac sales increase
It hasn't received much attention, but GM's often-maligned Cadillac luxury brand had a great quarter. The brand's global sales rose 18.3% to 111,422 vehicles, driven by its recently expanded lineup of luxury crossovers.
The Cadillac XT4 has done well in the United States -- but it's doing great in China. Image source: General Motors.
Why is that story flying under the radar? It's because most of the growth is happening outside of the United States. Cadillac's U.S. sales were up just 1.1% in the second quarter, an unremarkable result. But in China, Cadillac sales grew 36.6% in the second quarter, thanks to high demand for the new XT4 compact luxury crossover and the freshly revised one-size-up XT5.
Given that GM is set to launch the larger Cadillac XT6 crossover in China in the third quarter, the growth streak might continue for a while.
