Is the Worst Over for General Motors?

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July 24 (Bloomberg) -- Autotrader.com Senior Analyst Michelle Krebs discusses GM’s earnings and her outlook for the company on “In The Loop.” (Source: Bloomberg)

Falling short.

Joining me now is michelle krebs, senior trader at auto trader.com.

We look at gm in particular, yes, they missed on the top line, but we can really blame recall-related costs.

Is the work over?

There will be more costs going forward, but the underlying strength is terrific.

At gm not had those recall costs, they would have had an outstanding quarter.

That is what is -- what charles stevens, cfo of general motors, said earlier to matt miller.

Let me play you what he said about recall expenses.

We expect recall expenses to be up, but not materially versus the run rate -- the historic wrong rate we had prior to the first half, to think about the exposure to the run rate that we had in 2010 and 2013. we expect recall campaign expense to come down significantly versus the first half of the year and be more in line with our historic run rate.

So, trying to be a little more optimistic there, michelle.

Too much?

Do you believe him?

We will see.

We do not know the entire ken feinberg competition plan, what that will cost, because there is no cap on that, but the underlying strength of gm is quite amazing, frankly.

Consumers are not scared of buying general motors cars, and they are buying more expensive ones.

If you look at the transaction rate on pickup trucks, they are way up.

They're having success with sports utility right now.

That generates a lot of profit.

There is a lot of strength underneath.

It also seems that gm is providing less incentive versus ford, which is stopped providing more incentive.

Can you talk us through that a little bit?

Yes, general motors has cut way back on incentives.

Ford is up in large part because of lincoln.

They are trying to get the lincoln restarted.

Ford is selling down the current f series.

They are in the same position gm was in trying to sell old trucks to make way for the new ones.

Ford will have a new truck coming out in the second half, so there is always that balance.

But yes, gm is way down, and that is why transactions are up, as well as having product people really want to buy.

Let's talk about weak spots in these countries -- ford says they are seeing a larger loss from south american operations.

Gm also said south american sales fell 18% in the second quarter.

How much does the u.s. and europe have to be to offset?

Well, for the past few years, the u.s. has been the bright spot.

It will continue to be.

We expect sales to be stronger this year than last, and we still see really good discipline in terms of supply and demand.

So, you know, north america was still carry the load, and south america has forward guidance that it will not get a lot better there.

Europe is a weak spot, but ford certainly showed a lot of improvement with their first profit there in three years -- small, but a prophet.

The prophet is a prophet.

-- profit is a profit.

Thank you, michelle krebs.

We will look at the initial offering.

How will it stack up to competitors of amazon?

This text has been automatically generated. It may not be 100% accurate.

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