Investing.com - U.S. automaker General Motors Company (NYSE:GM) reported weaker-than-expected second quarter earnings ahead of Thursday's opening bell, sending its shares lower in pre-market trade.
General Motors said adjusted earnings per share came in at 58 cents in the second quarter, below expectations for earnings of 59 cents per share.
The automaker's second quarter revenue totaled $39.6 billion, missing forecasts for revenue of $40.63billion.
Strong core operating performance during the quarter was offset by a pre-tax net loss from special items of $1.3 billion, or 47 cents per diluted share, and costs of $1.2 billion pre-tax primarily for recall-related repairs, or 44 cents per diluted share.
A special charge of $0.4 billion was taken for the GM ignition switch compensation program. There is no cap on this program, but this charge is the company's best estimate of the amounts that may be paid to claimants. Due to the unique nature of the program, this estimate contains significant uncertainty and it is possible the total cost could increase by approximately $0.2 billion.
As previously disclosed, going forward the company expects recall expense to normalize to a slightly higher rate than it experienced prior to this year, but not materially.
The company is changing how it estimates future recall expense and will now accrue at the time of vehicle sale an amount that represents management's best estimate of future recall costs in North America.
As a consequence of this change, GM is taking a $0.9 billion non-cash pre-tax special charge in the second quarter for the estimated costs of future possible recalls for up to the next 10 years on 30 million GM vehicles on the road today.
"Our underlying business performance in the first half of the year was strong as we grew our revenue on improved pricing and solid new vehicle launches," said GM CEO Mary Barra.
Following the release of the report, General Motors (NYSE:GM) shares dropped 2.8% in pre-market trade.
Meanwhile, the outlook for U.S. equity markets was upbeat. The Dow indicated a gain of 0.2% at the open, the S&P 500 pointed to a rise of 0.2%, while Nasdaq 100 tacked on 0.3%.
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