News Column

GM Reports Rise in 4Q Net Income

February 14, 2013

Nathan Bomey

Auto Sales

General Motors' net income in 2012 fell 36% to $4.9 billion from a year earlier as Europe weakened and several onetime accounting items affected the company's bottom line.

The company, whose fourth-quarter net income rose 89% to $892 million, announced that it will issue profit-sharing checks of up to $6,750 to its 49,000 hourly U.S. workers.

The payments, which are based on the company's performance in North America, are about $250 less than the GM's previous profit-sharing checks.

GM's operating profit, which reflects its business operations without special items, rose 14% to $1.25 billion for the quarter and fell 5% to $7.9 billion for the full year.

"We recorded another solid year in 2012 as we grew the business, delivered a third straight year of profitability and took significant actions to put the company on a solid path for future growth," GM CEO Dan Akerson said in a statement. "This year our priorities will be executing flawless new vehicle launches, controlling costs and delivering more vehicles to our customers at outstanding value."

GM's revenue rose 3% for the quarter to $39.3 billion and 1% for the year to $152.3 billion.

In the company's healthy North American operations, pretax income fell 7% to $1.4 billion in the fourth quarter and declined 3% to $6.95 billion for the year.

The automaker's pretax loss in Europe grew by 24% from a year earlier to $699 billion. The loss equaled 12.5% of GM Europe's sales for the quarter, worse than 9% a year earlier. Its yearly loss in Europe more than doubled to $1.8 billion.

GM Chief Financial Officer Daniel Ammann said the company still expects to slightly improve its performance in Europe in 2013 despite a weakening outlook for the industry.

"What happens beyond that is going to be a function of how the European economy develops," Ammann said.

In GM's International Operations division, which includes the critical Chinese market, pretax income rose 27% for the quarter to $473 million and 15% for the year to $2.2 billion.

GM's U.S. market share fell from 19.2% in 2011 to 17.5% in 2012. It slipped from 18% in the fourth quarter of 2011 to 17.1% in the fourth quarter of 2012.

In the U.S., GM will introduce several crucial products in 2013. Most importantly, redesigned versions of the Chevrolet Silverado and GMC Sierra pickup trucks will hit showrooms within months. The redesigned Chevrolet Impala will be released this quarter, the Buick Encore compact crossover recently hit the market and a redesigned Cadillac CTS will be released in the fall. The redesigned Chevrolet Corvette Stingray will hit showrooms in the third quarter, although it won't be sold in high volumes.

"We have a really strong year of product introductions around the world in 2013," Ammann said.

Barclays analyst Brian Johnson said GM won't reap the full benefits of the new products until next year.

"We maintain our view that 2013 will be more challenged for GM, but a sweet spot exists in 2014, when GM is expected to benefit from multiple product improvements," Johnson said Wednesday in a research note.

GM added 3,000 U.S. employees from the end of 2011 to the end of 2012 for a total of 80,000. GM had 213,000 employees worldwide at the end of 2012, up from 207,000 a year earlier.

GM had several unusual items in the fourth quarter of 2012, but the net effect was a benefit of about $100 million. For the full year, special items led a negative effect of about $500 million.

The special items included changes to a complex taxable valuation allowance, a $5.2 billion impairment charge due to the reduced value of its European assets, a previously announced $2.2-billion payment associated with its salary pension changes and a $400-million impairment charge to its investment in French automaker PSA Peugeot Citroen.

For more coverage on the automotive industry, please see HispanicBusiness' Auto Channel

Source: (c) 2013 the Detroit Free Press. Distributed by MCT Information Services

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