GM post 4th quarter profit…
Here is the article from the Detroit Free Press.
GM’s 4th-quarter profit: $950 million
March 14, 2007
General Motors Corp. today credited on-target cost-cutting and improved automotive results with boosting its fourth-quarter profit to $950 million.
In the fourth quarter a year earlier, GM lost $6.6 billion.
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Revenue for the final quarter of 2006 was $51.2 billion, down from $51.7 billion a year earlier. GM said the decline was more than accounted for by the exclusion of finance division GMAC’s December revenue.
For all of 2006, the world’s largest automaker lost $2 billion, improved from its net loss of $10.4 billion in 2005. The company reported record annual revenue of $207 billion, up from $195 billion in 2005.
Were it not for special costs — largely associated with such restructuring measures as massive buyouts and costs associated with the Delphi bankruptcy — GM said it would have posted a profit of $2.2 billion for 2006.
GM stock was down 60 cents to $29.91 at midday.
Of Detroit’s three automakers, analysts give GM credit for being the furthest along in its financial turnaround. Its results contrast with declines in year-end results at Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group. Ford lost $12.7 billion in 2006 and Chrysler’s parent began shopping for a buyer following its $1.5-billion year-end loss.
“We needed 2006 to be a big year, and it was,” GM Chairman and CEO Rick Wagoner said in a statement. “Our performance last year reflects the significant progress we’ve made toward transforming GM into a more competitive, global business focused on long-term sustainable success.”
“But nobody at GM is declaring victory, because we all know there is still a lot more work to do to achieve our goals of steady growth, solid profitability and positive cash flow generation.”
In North America, in particular, the company reported significant improvements, cutting structural costs by $6.8 billion in 2006 and by $9 billion on an annual running rate.
“Earnings were positive, but the falloff in GMAC combined with continued pressures in GM North America brought GM in well below consensus,” Lehman Brothers auto analyst Brian Johns said in an investor note today.
GM North America posted a $5-billion earnings improvement for the year with an adjusted net loss of $779 million. The division reported an adjusted net loss of $14 million in the fourth quarter, which was what Chief Financial Officer Fritz Henderson called a significant improvement compared with the $1.4-billion loss in the same quarter of 2005.
“This is a pretty significant improvement for the fourth quarter. We basically broke even for North America,” Henderson said. “And for the calendar year, we significantly trimmed our losses. … . It’s clear we need to continue to drive America forward, because these results, while improved considerably, are still not an acceptable level.”
And despite a forecast that its global automotive sales would increase this year compared with 2006, and that revenues would rise as well, Henderson says he expects improved, but still negative, cash flow in 2007.
That concerns analysts, such as Credit Suisse auto analyst Chris Ceraso, who wrote in an investors’ note recently that he expects 2007 to be GM’s peak earnings year for some time.
“The fact that GM will still be cash flow negative in such a strong earnings year remains one of our — and the market’s — primary concerns about the longer-term prospects for the stock.”
Along with its 2006 results, this morning GM also restated its net income going back to 2002. GM had delayed its 2006 earnings announcement from January while the company fixed accounting errors going back to 2002 and closed the books on the 51% sale of finance unit GMAC.
GM said it lost $10.4 billion in 2005, earned $2.7 billion in 2004, earned $3.5 billion in 2003 and earned $1.7 billion in 2002.
GM said those results had no impact on cash flow for any of the restated periods.
Contact KATIE MERX at 313-222-8762 or kmerx@freepress.com.
