GM posts first full-year profit since 2004

DETROIT (Reuters) - General Motors Co posted fourth-quarter results that topped Wall Street expectations, capping its most profitable year in over a decade after slashing costs and debt in a landmark bankruptcy.

Chevrolet cars are seen at a GM dealership in Miami, Florida August 12, 2010. REUTERS/Carlos Barria

Profit for all of 2010 was $4.7 billion, GM’s first full-year earnings since 2004 and its largest profit since 1999, when it earned $6 billion on booming sales of trucks and SUVs.

GM shares opened at $34.85, up 26 cents, following the earnings report early Thursday.

Separately, GM said the audit committee of its board had determined the company’s financial operations under Chief Financial Officer Chris Liddell had remedied a “material weakness” in financial reporting, addressing a lingering concern for investors.

The automaker said it would pay more than $200 million in bonuses to hourly workers, including payouts of about $4,300 for each of its roughly 45,000 U.S. factory workers represented by the United Auto Workers union.

Liddell said he expected the current quarter would represent a “strong start” to 2011 and said the fourth quarter had been slightly ahead of the automaker’s internal projections.

“From our point of view it was a very good result,” he told reporters.

Despite the stronger-than-expected fourth-quarter result, analysts have raised concerns about pressure on GM profits from rising commodity prices, higher costs for launching new vehicles, and the risk of a sustained spike in oil prices.

GM management, led by Chief Executive Dan Akerson, warned in a January meeting with analysts that fourth-quarter earnings would be below the rate for the first three quarters of the year.

Fourth-quarter net income was $510 million, or 31 cents per share. Earnings for the first three quarters of 2010 totaled $4.2 billion.

After adjusting for a one-time charge for buying back preferred shares held by the U.S. Treasury, fourth-quarter earnings per share were 52 cents, at the high end of Wall Street expectations.

Analysts polled by Thomson Reuters I/B/E/S on average had forecast adjusted profit of 46 cents per share.

On an adjusted basis, GM’s earnings before interest were slightly below expectations at about $1 billion, reflecting higher costs as the automaker ramped up vehicle development efforts and spent more on advertising, Liddell said.

Fourth-quarter revenue was $36.9 billion, up from $32.3 billion a year earlier and topping Wall Street expectations of nearly $33 billion.

GM’s European operations posted a loss of $568 million for the fourth quarter and a loss of $1.7 billion for the year. The automaker has said it hopes the unit -- known for its Opel brand -- will break even this year.


GM ended 2010 with nearly $28 billion in cash and about $5 billion on an undrawn credit facility. Its U.S. pension plans were underfunded by about $12 billion, Liddell said.

The Detroit-based automaker suspended some of its vehicle development efforts as it tried to conserve cash in the run-up to bankruptcy. It faces higher costs now to revive those programs, including efforts to broaden its offering of electric cars beyond the just-released Chevrolet Volt.

GM, which had a record-setting $23 billion initial public offering of stock in November, has been seen by investors and analysts as a bet on the continuing recovery in the U.S. auto industry and fast growth in markets led by China.

The U.S. auto sector is still widely seen as being in the early stages of a recovery from its near-collapse in 2008 and the U.S.-government funded bankruptcy of GM in 2009.

For GM to keep the U.S. Treasury from losing on its $52 billion bailout, the remaining 33 percent U.S. government stake in the company would have to be sold at about $53 a share.

Liddell wooed fund managers during GM’s IPO roadshow with a promise that the automaker would never again become “a $100 billion pension plan with a small company attached.”

As part of Liddell’s effort to develop a “fortress balance sheet,” GM contributed $4 billion in cash to its U.S. pension plans in December and added another $2 billion in common stock in January.

From 2005 to 2009, GM lost about $88 billion in its slide to bankruptcy as it struggled to shed costs in the U.S. market.

Reporting by Kevin Krolicki; editing by John Wallace