DETROIT -- General Motors today posted pretax operating profit of $10.8 billion for 2015 -- including $2.8 billion in the fourth quarter -- as executives sought to reassure skeptical investors that there is plenty of profit potential remaining in the key U.S. and China markets.
Booming sales of pricey SUVs and pickups in the U.S. and a resilient showing in China drove GM’s stout pretax operating profit for the full year, which jumped 67 percent vs. 2014, a year marred costly safety recalls. The operating result excludes one-time items -- the number GM says best reflects its underlying performance -- and was the highest since before GM’s 2009 bankruptcy. (A spokesman couldn’t confirm whether that number eclipsed the record annual profit of pre-bankruptcy GM).
The full-year operating profit excluding one-time items -- the figure that GM says best reflects its underlying performance -- marked a 67 percent jump from 2014 and was the highest amount since before the company’s 2009 bankruptcy. (A spokesman couldn’t confirm whether that number eclipsed the record annual profit of pre-bankruptcy GM).
GM’s fourth-quarter pretax operating profit excluding one-time items rose 15 percent to $2.8 billion. That was equal to $1.39 a share, vs. Wall Street forecasts of $1.21 a share.
Net income for the September-to-December period was $6.27 billion, inflated by a gain of about $3.9 billion from the favorable tax treatment on the reclassification of assets in certain European markets.
Fourth-quarter revenue was flat at $39.62 billion.
Despite hurdling analysts’ expectations across the board, GM shares fell 72 cents, or 2.4 percent, to close at $28.93.
GM also said it will pay most of its 49,600 UAW-represented employees profit-sharing checks of $11,000 later this month, a record amount.
Investor apathy
The stock pressure continued a theme of investor apathy toward GM and Ford Motor Co., even as the companies surpass profit forecasts. Ford’s share price also dropped last week after breezing past analysts’ estimates and posting record pretax profits of $10.8 billion and its first full-year profit in Europe since 2011.
In remarks to analysts and journalists today, GM executives tried to soothe investor concerns about a slowdown in China and the possibility of peak auto sales in the U.S.
"We know there’s been a lot written about the U.S. industry being at peak levels and that a downturn is imminent. We, like many others, do no share this view," CEO Mary Barra told analysts during a conference call. "We believe the industry fundamentals support a continued strong U.S. industry."
CFO Chuck Stevens said the industry’s sustained strength in North America “has sparked a debate whether the industry is peaking or plateauing,” he told analysts.
Stevens said the “bears” are worried about a 2007 scenario: a long streak of vehicle sales growth heading into a recession.
On the other hand, GM and others “believe the industry is plateauing, with many strong years of growth ahead,” Stevens said. He said the company’s forecast is more akin to the period of sustained, relatively high U.S. sales from 2000 to 2007.
Stevens acknowledged, though, that automotive is a “cyclical industry” and that GM has structured its cost base to be able to break even if the market tanks.
“We believe we’re well positioned for the downturn,” he said. “We just don’t believe it’s going to happen anytime soon.”
North American earnings
Pretax profit in North America rose 25 percent to $2.8 billion. Strong gains in truck sales helped push pretax profit margins to 10 percent for the quarter, up from 8.7 percent a year earlier. For the year, GM posted pretax earnings of $11 billion in North America.
The company’s International Operations division, which includes China as well as several Asian markets such as Korea and India, posted a 3 percent increase in pretax profit, to $408 million.
That unit would have lost money without China: GM’s fourth-quarter income from its joint-venture partnerships in China rose 12 percent to $572 million, despite shaky economic conditions during the quarter and a steep drop in China’s stock market. GM credited strong demand for its new crop of crossovers, including the Buick Envision.
For the year, International Operations had pretax earnings of $1.4 billion, up 14 percent from 2014.
GM lost $298 million in Europe during the quarter, vs. $393 million a year earlier. The results were hurt by a decline in market share related to the company’s wind-down of operations in Russia. European losses for the year narrowed to $813 million from $1.37 billion in 2014.
Stevens reiterated GM’s expectation that it will return to a profit in Europe this year.
In the recession-plagued South American market, GM lost $47 million for the quarter, vs. an $89 million pretax profit a year earlier. GM said it has taken a number of steps to minimize its losses there, including a 20 percent reduction in labor costs and a 35 percent cut in vehicle production.
Pretax profit at GM Financial rose 40 percent to $167 million.
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