Can the Company Declare Victory, Yet? GM’s First Annual Profit Since ’04 Is $4.7 Billion

In the year it issued a record $23 billion initial public offering, thus reducing U.S. Treasury (our) ownership from 61.8 percent to less than 27 percent, (plus 7 percent for Canada) General Motors posted its first full-year profit since launching the Holden-based Pontiac GTO in the U.S. Net profit totaled $4.7 billion. In 2004, GM made $3.6 billion and infamously had lost much more in the years between. GM earned money in all of its regions last year, except Europe, which lost $1.8 billion.

Chairman and CEO Dan Akerson summed it up as, “Good start, a lot more work to do.”

Earnings were $2.89 per share for the year, and 31 cents for the fourth quarter, when net profit slowed to half a billion dollars. This time, Wall Street analysts listened to GM’s warning its fourth quarter earnings would slip because of heavy spending on new cars and trucks. Analysts didn’t heed such warnings for Ford, which reported net income of $6.6 billion for fiscal year ’10, with $190 million in the fourth quarter. At GM, a total of $4 billion in payments to voluntary U.S. pension contributions affected the automotive operations free cash flow. It has reduced its underfunded pension obligations from $16.2 billion to $11.5 billion.

Analysts sent Ford stock bouncing up and down last month, because they expected more. They had expected about $5 billion in net income from GM Thursday. GM’s net cash from operating actions fell by $1.7 billion in the fourth quarter, the first drop since the fourth quarter of ’09. In the third quarter, net cash rose $2.6 billion, versus $3.8 billion in the second and $1.9 billion in the first.

GM, Ford and their competitors face “headwinds,” as Wall Street likes to call them, potentially as frustrating as what they faced in the summer of 2008. Libyans are trying to overthrow Qaddafi, sending crude oil above $100 per barrel worldwide, while gasoline was expected to crest $4 per gallon this summer even before large sections of the Middle East began to fight for democracy.

Steel prices also are rising, and the conservative-leaning U.S. Supreme Court Wednesday ruled that Mazda could be sued for failing to provide seatbelts pre-2007 that would have gone beyond the minimum government standards, sending auto stocks falling Wednesday.

GM is in good shape, this time, to weather another oil shock. Even if it can’t make and sell more Chevrolet Volts than the fewer than 10,000 it has promised in the first year, it has a poster child halo car for $4+ gas, and it’s selling boatloads of Chevy Cruzes and Equinoxes, with Buick Veranos and Chevy Sonics on the way. It even claims it can make money on these cars, which is far more important than any market share. With four North American brands to foster rather than eight, just a couple of models like the Cruze and Equinox can make the difference between success and failure.

GM reports its worldwide employment fell from 215,000 at the end of ’09 to 202,000 at the end of ’10, while it added 2,000 North American salaried employees. The North American operations have been busy hiring engineers and designers to make up for deep cuts during the bankruptcy. They’re busy trying to catch up on all the product programs that were put on hold from 2008 on. If re-opening the product floodgates brings on more successful products like the Chevy Cruze and Equinox, GM should have plenty of good financial news through the middle of the decade.

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