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Thursday, February 16, 2012

GM Record Profit Reported in The Detroit News

February 16, 2012 at 4:02 pm

GM's Akerson: $7.6B profit a 'solid performance'

A 2011 Chevrolet Cruze is featured at a car dealership in San Jose, Calif. in August. General Motors Co. said today it made more money in 2011 than any year in its history.
A 2011 Chevrolet Cruze is featured at a car dealership in San Jose, Calif. in August. General Motors Co. said today it made more money in 2011 than any year in its history. (Paul Sakuma / Associated Press)
General Motors Co. has reported a record profit of $7.6 billion for 2011, but trouble in Europe took a big bite out of the automaker's fourth-quarter earnings.
In the last four months of 2011, GM only made $500 million after factoring in a one-time charge of $200 million, the company said Thursday. That was about the same amount of money the company made a year earlier.
It translated into earnings of just 39 cents per share, excluding the one-time charge. Wall Street had been hoping for 41 cents per share, according to a survey of analysts by the Thomson Financial Network.
GM made $4.7 billion in 2010.
"Overall, we posted a solid performance for the year and showed steady progress," CEO Dan Akerson told analysts and reporters during a conference call Thursday morning. "Obviously, we still have a lot of work to do in some areas, and we're taking the necessary corrective actions to get the ball over the goal line."
General Motors reported strong gains in North America, where the automaker gained market share and increased its earnings before interest and taxes climbed to $7.2 billion in 2011, up from $5.7 billion a year before. In the fourth quarter, GM made $1.5 billion in the region, almost doubling the $800 million it reported for the same period in 2010.
"(It) was a year of solid recovery for GM," said Jesse Toprak, vice president of market intelligence at TrueCar.com in a report ahead of Thursday's earnings release. "The new crop of products from GM are helping to improve its brand image, resulting in a remarkable turnaround from what appeared to be a hopeless situation just three years ago."
But GM's European operations reported a net loss of $600 million for the fourth quarter. That was no better than a year earlier, and it is bound to increase pressure on General Motors to restructure its unprofitable German subsidiary Adam Opel AG and other money-losing European operations.
"We must move rapidly and decisively to take the steps necessary to lower the break-even point and improve the business," said GM CFO Dan Ammann. "We will work with all of our stakeholders — including the unions and governments of every country — to do what is required to fix this business."
The losses in Europe were less serious than some on Wall Street had feared.
"We initially view this as better than expected," said analyst Himanshu Patel of JPMorgan in a report issued after the earnings were released.
But he said he was "disappointed" by GM's performance in South America, which has long been a bastion of profitability for the company.
The automaker said it lost $200 million in the region in the fourth quarter of 2011. GM and other established players such as Fiat SpA are facing new competition from Korean and Chinese car companies in Brazil and other South American countries.
"We plan to aggressively refresh our somewhat aging vehicle portfolio in South America, while also executing stringent cost-control actions in the short-term," Akerson vowed.
Worldwide, General Motors said it expects to increase its top-line revenue growth in 2012 and increase capital spending to about $8 billion to fund the development of new vehicles and technologies.
GM ended 2011 with liquidity of $37.5 billion, up from $33.5 billion at the end of 2010. But the percentage of its pension obligations that were funded dropped to 88 percent from 89 percent.
On Wednesday, the Detroit automaker took a major step toward strengthening its balance sheet, announcing that it would freeze its traditional, defined-benefit pension plan for U.S. salaried employees in October and move all white-collar workers to a defined-contribution, or 401(k), plan.
General Motors filed for bankruptcy in 2009 and was only saved by a taxpayer-funded bailout. The U.S. Treasury Department still owns about 26 percent of the company.

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