Managing the coming 'chaos': Analysts weigh in on GM
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GM's big launch for 2013 is the introduction of the 2014 Chevrolet Silverado, pictured, and GMC Sierra. Photo credit: GM |
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General Motors reported a weaker-than-expected fourth-quarter profit on Thursday, citing wider losses in Europe and lower vehicle prices in its core North American market. The company also took an accounting change in the quarter intended to signal confidence that it will continue to be profitable in coming years.
During the fourth quarter, prices also fell in North America, GM's most profitable region, as the company offered incentives to cut through its inventory of large pickup trucks. Net income in the fourth quarter rose to $892 million from $472 million a year earlier. For all of 2012, GM earned $4.9 billion, down from a record $7.6 billion in 2011 due to higher tax rates and weakness in Europe.
A look at what analysts and others have to say about GM's latest financial results and outlook:
"While some of the operating metrics in North America seemed light to us -- margins, pricing, market share, and inventories -- much of this will likely be self-correcting given GM's substantial product pipeline over the next 12-18 months. We ... expect that the cadence of 2013 earnings is likely to be materially more back-ended this year than historically."
-- Analyst Peter Nesvold of Jefferies & Co.
"We maintain our view that '14 is the sweet spot for GM, as we expect GM to benefit from multiple product improvements ... while also demonstrating improvement in its path to breakeven in Europe."
-- Brian Johnson, an analyst with Barclays
"It was actually a quarter of robust growth in the fourth quarter and the fact that GM did not have new product hurt their consideration in the marketplace."
-- Jesse Toprak, an industry analyst with TrueCar.com
"We're going to find out how well-oiled the North American machine is in the first half of this year as they run out of old [large pickup] product and prepare for new product. There's no way it can be flawless. Nothing is flawless. But just how much can they control the chaos?"
-- Morgan Stanley analyst Adam Jonas
"[Europe is] going to be challenging for another few years. They're moving in the right direction, but it's difficult over there to move fast because it's so challenging to shut down plants. Competition remains a real threat for GM. They are fighting back by revitalizing their product lines, but it remains to be seen if that will be enough to fend off competitors. Japanese automakers are benefiting from a weaker yen, and European automakers are starting to eye the stronger U.S. market to offset sluggish sales in their home market."
-- Edward Jones analyst Christian Mayes
"U.S. pension underfunding essentially unchanged at $13.1 billion. Unlike Ford, which is making aggressive voluntary contributions this year, GM's strategy of not funding [pension obligations] this year does free up its cash deployment options, though it's possible GM may be opting to reserve cash for any future hourly de-risking actions, in our view."
-- CitiGroup analyst Itay Michael
Reuters, Bloomberg and David Phillips contributed to this report
