Money set aside for a victim's compensation fund dented GM's profit despite rising vehicle sales in North America, while Ford profits were helped by a turnaround in Europe. Fred Katayama reports.
Consumers keep buying GM's cars despite the faulty ignition switch issue, but the seemingly endless series of recalls slammed its profit. Net income plunged nearly 80 percent in the latest quarter. GM says it's taking a charge of $400 million for its ignition switch compensation fund, and it warned it may have to boost that amount by 50 percent. It's also writing off $874 million to cover the costs of future recalls of vehicles on the road today in North America. GM has recalled nearly 26 million cars this year alone in the U.S. J.P. Morgan analyst Ryan Brinkman said, "We do see positives in that the provisioning for ignition switch wrongful death and personal injury compensation likely tracked better than some investors feared." In the U.S., GM managed to charge higher prices and boost vehicle sales across each of its brands. And with record deliveries in China, GM grew its total revenue. And it predicts it'll boost its operating profit this year. Its cross-town rival Ford boosted profit six percent, driven by its strong performance in North America and Europe. That offset a loss in Latin America. Restructuring of its European unit helped Ford produce its first quarterly profit there in three years. Ford's stock rose at the start of trade. GM shares, down nearly 8 percent this year, skidded further south.