GM reported strong profits in the fourth quarter of 2012

Article by Christian A., on February 18, 2013

In the fourth quarter, General Motors reported strong profits in Asia and North America and posted bigger losses in Europe while it boasted its third consecutive profitable year since emerging from bankruptcy. For the period from October to December, GM reported $892 million in net profit. This is 89% higher than the figure recorded in the previous year.

These include some one-time charges and gains that added around $100 million to the bottom line of GM. If these items are excluded, GM’s operating profit had an increase of 14% to $1.25 billion. GM thinks that operating profit is the best indicator of its performance. For the entire year, GM posted a net income of $4.86 billion, which is 36% lower than the $7.59 billion record that it had set in 2011.

According to GM’s quarterly earnings statement, its operating income in 2012, before any one-time items, fell 5% to $7.86 billion. This meant that Wall Street was dismayed with GM's results, on an earnings-per-share basis. GM said that after the one-time items, it earned 48 cents a share during the quarter, which is 3 cents lower than the estimate from Reuter’s survey of analysts. GM’s shares decreased by 3.3% to close the day at $27.72.

In a conference call, GM CEO Dan Akerson told analysts that GM had a “solid year” in 2012. Even with the expanding red ink in Europe, Akerson is not changing its previous prediction of reaching breakeven in Europe by mid-decade. He believes that a labor deal with German unions will be finalized by the end of March.

This labor deal is a crucial part in the restructuring plan of GM. Akerson said that they can’t control the market. However, there are some levers that they can pull. He also emphasized that the company is attempting to play offense, not just defense. This is why it is entering new segments. For instance, it has recently launched the Opel Mokka small crossover and Adam minicar. The operating losses of GM in Europe for the fourth quarter increased to $699 million, from $562 million the previous year. For the full year, its losses increased sharply to $1.8 billion, from $747 million in 2011.

Topics: gm, profit

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