The No.1 US automaker, currently in the midst of the biggest safety scandal of the year, has reported a dwindling second-quarter profit. The miss was triggered by recall-related costs and by a charge of at least $400 million for the ignition switch victims’ compensation fund.
The quarter’s net income dipped to $190 million, or 11 cents a share – a huge difference from last year’s $1.2 billion, or 75 cents a share. Without one-time charges, GM actually had earned 58 cents a share.
“We’re on or ahead of the plan we shared in January,” Chief Financial Officer Chuck Stevens told reporters. “Our expectation is that the second half of the year will be better than the first half.”
The one-time items for the company included the set up of the victims’ compensation fund for the liabilities related to the 2.6 million cars recalled in February because of defective ignition switches. The faulty part can stop the engine mid-driving, causing potentially catastrophic loss of critical safety systems, including power brakes operation and airbags deployment.
The company also took an $874 million charge as it changed the way it will account for recalls in the future. There were additionally $200 million in restructuring costs and the company also incurred costs of $1.2 billion for the recalls so far – almost 29 million units.