* Profit before items 48 cents a share; Wall Street view 51
* GM writes down Peugeot investment by $220 million
* CFO says GM is "not betting on" pickup in Europe this year
* Shares down 3.4 percent
By Ben Klayman
DETROIT, Feb 14 General Motors Co
reported a weaker-than-expected fourth-quarter profit on
Thursday, citing wider losses in Europe and lower vehicle prices
plus higher costs in its core North American market.
The largest U.S. automaker also made an accounting change in
the quarter, intended to signal confidence that it will continue
to be profitable in coming years. The move resulted in a $26
billion charge for the quarter, however.
Shares of GM, which did not change its 2013 profit outlook,
initially bounced between positive and negative territory and
were off 3.4 percent at $27.69 in late trading.
"An entrenched GM investor may see no need to sell, while a
prospective investor may see no need to rush in," Morgan Stanley
analyst Adam Jonas said in a research note.
GM went public in the autumn of 2010, after its 2009
bankruptcy restructuring and $50 billion U.S.-taxpayer bailout.
Several analysts said GM's $699 million operating loss in
Europe in the quarter was wider than they had expected.
Conditions in the region will be challenging for another few
years, said Edward Jones analyst Christian Mayes, who has a
"hold" rating on GM's stock. "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."
GM posted a profit of 48 cents per share before one-time
items, 3 cents shy of the analysts' average estimate, according
to Thomson Reuters I/B/E/S.
Operating losses in Europe last year more than doubled to
$1.8 billion, reflecting rapid deteriorating vehicle demand and
weak economic conditions there. It was the 13th straight year of
losses in Europe.
"Europe was a little lighter, although I don't think people
are going to really punish the stock for a few pennies' miss in
Europe, just because we're probably at or near the bottom of
that cycle," said Jefferies analyst Peter Nesvold, who rates GM
shares at "hold."
Chief Financial Officer Dan Ammann said GM still expects
industry sales in Europe to decline in 2013 and is "not betting
on" a pickup later in the year, but Chief Executive Dan Akerson
reiterated the company's goal of breaking even in the region by
"It's not like we're just hoping for the best," he said
about Europe on a conference call. "We have certain levers that
we can pull.
"We're going to be smart about how we cut costs. It isn't
just 'close plants.' We're trying to play offense."
Akerson pointed to the new Opel Mokka SUV and Adam minicar
in Europe, where GM has said it will introduce 23 new vehicles
between 2012 and 2016.
Barclays analyst Brian Johnson said in a research note that
"investors should take some comfort," as GM Europe will show a
$600 million drop in depreciation and amortization expenses due
to a writedown of assets. As a result, he now expects GM
Europe's loss this year to be closer to a range of $1.1 billion
to $1.2 billion, instead of the $1.4 billion he previously
LOWER PRICING AT HOME
During the fourth quarter, costs rose by $400 million in
North America, GM's most profitable region. But combined vehicle
pricing fell by $300 million there as the company offered
incentives to cut through its inventory of trucks on dealer lots
ahead of its introduction of redesigned versions this year.
It was the first drop in North American pricing for GM since
the first quarter of 2011.
Jefferies' Nesvold said the weaker Japanese yen and the
deteriorating European market would probably lead to more
competitive pricing in North America.
That would continue the trend seen in the fourth quarter,
when GM lost one percentage point of U.S. market share despite
raising its incentives slightly, according to research firm
GM's revenue in the fourth quarter rose 3 percent to $39.3
billion, above the $39.15 billion analysts had expected.
Net income at the Detroit company almost doubled to $892
million, or 54 cents a share, from $472 million, or 28 cents a
share, a year earlier.
Operating profit fell 6.8 percent to almost $1.4 billion in
North America, but jumped almost 27 percent to $473 million at
the international operations unit, which is dominated by China,
where GM is a market leader. South America swung to a $99
million profit from a year-earlier loss of $225 million.
The quarterly results included a $34.9 billion reversal of a
valuation allowance on U.S. and Canadian deferred tax assets.
The move, which rival Ford Motor Co made in late 2011,
reflects confidence in GM's ability to generate taxable income
in those markets.
GM took a non-cash goodwill asset impairment charge of $26.2
billion related to the valuation allowance, wrote down $5.2
billion worth of assets in Europe, and took a charge of $2.2
billion for its action last summer to cut its U.S. salaried
The company also wrote down $220 million, or about half, of
its investment in French alliance partner PSA Peugeot Citroen
. GM, which paid $423 million for its 7 percent stake
in Peugeot, warned last August that it might take such an action
due to the deepening fiscal crisis in Europe.
Ammann said on Thursday that GM had no plans to put more
cash into Peugeot, with which Akerson said the company has a
GM did not change its 2013 outlook from last month, when it
forecast its operating profit to rise modestly.
For the first quarter, Ammann said GM expects to take a $200
million charge for the devaluation of the Venezuelan currency.
He also said the company has no plans to contribute to its U.S.
pension plans this year.
Akerson also said the company would probably not fill its
vacant global marketing chief position. Instead, it will have
global heads for each brand.
GM would like to boost the number of plants in North America
operating on three shifts to increase output and reduce
structural costs, a strategy it is following globally, said
Chuck Stevens, CFO for the region. Eight of GM's 19 plants there
currently operate a third shift.
GM also is targeting a full-size pickup truck market share
in the United States of 36 percent to 38 percent this year,
Stevens said. That would be up from 36 percent last year.
Ammann told reporters in a later conference call that GM had
completed the repurchase of a 1 percent stake in its joint
venture with its top Chinese partner SAIC Motor Corp
. He said the Chinese government approved the
purchase last year.
The deal restored GM's stake in Shanghai GM to 50 percent.
However, SAIC retains a 51 percent share in the sales side of
the business. In the run-up to its 2009 bankruptcy filing, GM
sold the 1 percent share to SAIC for $85 million.
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. The results in 2011 included $1.2 billion in gains from
asset sales, while 2012 had $500 million in unfavorable items.