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GM posts $7.6 billion profit for 2011

Thu, 16 Feb 2012

General Motors on Thursday posted a $7.6 billion profit for 2011, while recording its smallest quarterly profit of the year in the fourth quarter.

Net income for the October-through-December period fell 7 percent from the year-earlier period to $472 million, as a $562 million loss in Europe--the steepest of the year there--weighed on the automaker's bottom line. North American earnings nearly doubled.

The fourth-quarter net income included several one-time gains and losses. GM recorded a $749 million gain in November for shifting retiree health-care expenses in Canada into a trust. It also recorded goodwill impairment charges of $621 million in Europe and $258 million for its GM International operations unit, primarily China, and $555 million related to investments in Ally Financial, GM's former captive finance arm.

Stripping out those one-time events, GM said its quarterly profit would have been $900 million.

"We will build on these results as we bring more new cars, crossovers and trucks to market, and make GM a far more efficient global team," GM CEO Dan Akerson said in a statement. "This includes reducing our break-even level in Europe and South America and driving higher revenues around the world."

Fourth-quarter revenue rose 3 percent to $38 billion.

The 2011 net profit of $7.6 billion compares with 2010 earnings of $4.7 billion and was padded by a $1.6 billion gain on a first-quarter sale of stock that GM owned in supplier Delphi Automotive.

GM's fourth-quarter results marked its eighth straight quarterly profit since its July 2009 emergence from a U.S.-steered bankruptcy.

Challenges in Europe

While GM's performance in Europe worsened late in 2011 amid the continent's economic troubles, the automaker trimmed its full-year losses there to $747 million, from $1.95 billion in 2010.

GM executives have said they are committed to fixing Opel, the European unit, and are working on plans to stem the losses. GM hasn't detailed any so far beyond dispatching several executives overseas. They reportedly are considering closure of assembly plants in Bochum, Germany, and Ellesmere Port, England, which have a combined work force of more than 5,000 employees.

Speaking to reporters at GM's headquarters on Thursday, CFO Dan Ammann said the company is in talks with its unions in Europe but wouldn't detail what steps are being discussed.

He said the restructuring in Europe over the past two years "has not gone far enough and has not reached break even in the environment we're in today." GM is "looking at all elements of the business," he said, "to make sure that we make the changes we need to make to get the business profitable."

GM's North American profit in the fourth quarter rose 84 percent to $1.50 billion on stronger pricing and lower costs. Ammann said he expects pricing in North America to remain strong this year.

In South America, GM lost $225 million, its second straight quarterly loss there following several profitable quarters. Ammann blamed the losses on cost pressures and an aging product portfolio, which should improve when GM launches several new vehicles this year. For the year, South America swung to a loss of $122 million from a profit of $818 million in 2010.

GM's International Operations, led by its operations in China, recorded a $373 million profit in the fourth quarter. It posted a net profit of $1.90 billion for the year, down 16 percent.

This year's outlook

Offering a broad forecast for 2012, GM said it expects industry sales volume worldwide to grow, while global market share will be roughly flat after growing by 0.4 percentage points to 11.9 percent last year. Costs also will be flat, while pricing will be up, GM said.

GM Financial posted a pre-tax profit of $170 million in the fourth quarter, bringing its full-year pretax profit to $622 million, up from $129 million a year earlier.

GM said its funding shortfall on its U.S. pension grew in 2011 to $13.3 billion, from $11.5 billion at the end of 2010, largely because lower interest rates reduced the pension fund's interest income. Its U.S. defined-benefit pension plans ended the year 88 percent funded, vs. 89 percent a year earlier.

During the year, GM shifted more of the plan's assets to less risky investments--reducing its equity holdings to 14 percent from 29 percent, for example.

On Feb. 15 GM said it will freeze the defined-benefit pension plan for salaried workers and move them to a defined-contribution 401(k) plan, effective Sept. 30, while also offering new retirees a lump-sum payout--both moves aimed at reducing its future pension obligations. The pension-plan change affects salaried workers hired before Jan. 1, 2001; those hired since then already are covered by a defined-contribution plan.

Ammann wouldn't comment on whether GM is considering offering a lump-sum payout to hourly retirees, saying only that GM is reviewing other options to reduce its exposure to pension costs.

As a result of GM's quarterly results, the company will pay profit sharing of up to $7,000 to about 47,500 eligible U.S. hourly employees.




By Mike Colias- Automotive News