GM Invests in Ohio Facilities - Analyst Blog


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General Motors Company ( GM ) plans to pump $220 million in its northeast Ohio facilities in order to manufacture the next generation Chevrolet Cruze compact car. The investment will preserve more than 5,000 jobs at the plants located in Lordstown, Ohio and Parma near Cleveland.

The revamped Cruze will be equipped with new styling, nicer interior and better gas mileage than the existing version that delivers 35 to 42 miles per gallon on the highway. The existing version of Cruze is the second-best selling car of GM with nearly 129,000 units sold so far this year.

GM has not mentioned the production date of new Cruze. The company's Lordstown plant began producing Cruze in September of 2010 and built 500,000 units of the car since that time. On the other hand, the Parma Metal Center delivered 60 million parts and processed more than 1,000 tons of steel per day in 2011 to cater to majority of GM vehicles manufactured in North America.

GM has invested more than $7.3 billion in its U.S. facilities since 2009. In May last year, the company had initiated its investment plan of $2 billion, targeting 17 assembly and components plants in 8 states for 18 months in the U.S. Through the investment plan, the automaker intended to create or preserve more than 4,000 hourly and salaried jobs at the plants.

GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in profits to $1.49 billion or 90 cents per share in the second quarter of the year from $2.52 billion or $1.54 in the same quarter of 2011. Nevertheless, profits exceeded the Zacks Consensus Estimate by 15 cents per share.

Revenues in the quarter fell 4.5% to $37.61 billion, which is lower than the Zacks Consensus Estimate of $37.98 billion. Unit sales rose 3% to 2.39 million vehicles from 2.32 million vehicles in the second quarter of 2011. The automaker occupied a worldwide market share of 11.6% during the quarter, down from 12.3% a year-ago.

The decline in profits and revenues was attributable to strengthening of U.S. dollar against most of the major currencies as well as weak macroeconomic conditions globally, especially in Europe and South America.

Meanwhile, GM's cross town rival Ford Motor Co. ( F ) posted a 39% fall in profits of $1.20 billion or 30 cents per share in the second quarter of the year from $1.98 billion or 49 cents in the corresponding quarter of 2011 due to lower operating results in all the regions except North America. However, the company's profits were higher than the Zacks Consensus Estimate of 28 cents per share.


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