GM posts record Q4 operating profit, $4.9B loss on tax charge

DETROIT -- U.S. tax reform caused General Motors to report a loss of $4.9 billion for the fourth quarter, while the company achieved record operating profit for the period.

Despite a $7.3 billion noncash charge, GM narrowed its fourth-quarter losses by $1.9 billion compared with the same period in 2016. Without the charge, GM would have earned $2.4 million for the quarter.

Wall Street liked the results. GM shares rose 5.8 percent to close at $41.86 during a volatile day of trading. 

The results are based on continuing operations, which do not include those such as its former Opel/Vauxhall business, sold by GM to PSA Group in 2017. Overall, the net loss was $5.15 billion, with a larger tax-related charge of $7.9 billion.

"The important aspect is to look at the operating results," GM CFO Chuck Stevens said on Tuesday with the release of the quarterly and full-year reports

In the fourth quarter, GM's adjusted earnings, before interest and taxes, increased 19 percent to $3.09 billion, and its global margin increased 1.7 percentage points to 8.2 percent. Revenue declined 5.5 percent to $37.7 billion due to lower volumes in North America.

For the year, the automaker's adjusted earnings, before interest and taxes, equaled its $12.8 billion record from 2016, while income plummeted 96 percent to $300 million largely due to the tax changes and a largely noncash charge of $6.2 billion from the sale of its European operations.

“We couldn’t’ be more pleased about our results and the execution, the disciplined execution, across all of our business units in 2017,” Stevens said.

GM last month advised its financial results in 2018 to be in line with earnings in 2017, followed by an "even better" performance in 2019.  

• Regions: North American earnings increased 7.3 percent to $2.9 billion in the fourth quarter. GM on Feb. 23 expects to pay up to $11,750 in profit sharing payments to UAW members. The company's international operations earned $416 million, up from $223 million in 2016.
• Finance: GM Financial reported earnings of $301 million, up 85 percent from $163 million a year earlier. Forty percent of GM’s sales in the U.S. last year were financed through GM Financial, according to Stevens.
• Operating profit margin: The North American margin for the year was 10.7 percent -- the third straight year above 10 percent.
• Risk factors: Stevens said GM is "not overly concerned at this point" about the prospect of hyperinflation and the economy overheating, which has sent stocks tumbling in recent days.
• Expectations: GM's results beat Wall Street estimates, as it reported a record earnings per share of $6.62 for the year, including $1.65 in the fourth quarter -- a key metric for how Wall Street judges the company.