North America, China power GM to record $9.7b annual profit

How GM’s business units performed during the quarterIt was a record quarter and a record year for GM in terms of pre-tax earnings and margins, CFO Chuck Stevens told reporters in a conference call on Wednesday morning.

Full-year earnings were 9.7 billion, up from 3.9 billion in 2014. GM’s eligible US hourly workers will receive profit-sharing checks of $11,000 on February 26, the company said.

GM’s full-year net income in 2015 rose to $9.7 billion, or $5.91 a share, from $2.8 billion or $1.65 a share, in 2014. Profit in North America rose to $2.8 billion from $2.2 billion a year earlier. The brighter outlook for Europe allowed GM to log the $3.9 billion benefit in the latest quarter, a gain that was tied to the release of valuation assets on GM Europe deferred tax assets.

“It was a strong year on many fronts, capped with record sales and earnings, and a substantial return of capital to our shareholders”, said Mary Barra, GM chairman and CEO. Shares fell 94 cents, or 3.1 percent, to $28.71 in morning trading Wednesday.

GM said its market share climbed 20 basis points year over year, again driven by China, although declines in market share in Europe and South America partially offset this increase. He said GM has already restructured and now “we’ve got the right cost structure”. For the fourth-quarter the company’s profit margin in North America was exactly 10% and 10.3% for all of 2016.

The profit more than doubled GM’s 2014 earnings and was aided by a $US3.9 billion fourth-quarter accounting gain because the company expects to be profitable in Europe this year. “In our view, we are at a plateau, not a peak, and GM certainly has some company specific drivers that should allow [North America] margins to improve in 2016”, RBC wrote in a note to clients.

$6.3 billion, or $3.92 per diluted share, up from $1.1 billion, or $0.66 per diluted share during the fourth quarter of 2014. Equity income from GM’s Chinese joint venture during the period was $572 million, up from $511 million a year ago. Profits were fueled by strong SUV and truck sales largely in North America. However, both revenue and adjusted earnings per share for the quarter beat analysts’ estimates. They argue US vehicle sales have plateaued, rather than peaked, and predict additional growth.

Barra and Stevens said GM is a different company now.

GM reaffirmed its recent guidance for 2016 that adjusted earnings per share would be between $5.25 and $5.75. The automaker expects to cut operating costs by US$5.5 billion by 2018, and return US$16 billion to shareholders in dividends and share buybacks over that span.