GM drives to US$2.8b profit even with recalls
Print Edition
IF it weren’t for the recalls, 2014 would have been a stellar year for General Motors.
Even with US$2.8 billion in pretax costs to fix more than 30 million recalled vehicles and US$400 million set aside for death and injury claims, GM still managed to turn a US$2.8 billion profit.
That’s because otherwise, most of the stars lined up well for the Detroit automaker. Gas prices dropped more than a buck to US$2.26 per gallon. The US economy gained steam. Cheap credit was abundant.
Combined, they sent buyers to GM’s newly redesigned and lucrative pickup trucks and large SUVs in North America, the company’s most profitable market. At the same time, chief competitor Ford’s truck plants were down much of the year while it switched to a new pickup with a risky aluminum body. Sales in China grew faster than the market. Worldwide sales were up 2 percent to 9.9 million vehicles, a record.
Things were so good, GM decided to raise its dividend next quarter by 20 percent, to 36 US cents, pending board approval.
Yes, there was trouble in Europe, Russia and Latin America, but by and large, GM had a good year.
GM’s full-year earnings amounted to US$1.65 per share. Net income was down 26 percent from US$3.8 billion in 2013. But excluding one-time items, GM made US$3.05, beating Wall Street’s expectation of US$2.64, according to FactSet. Revenue rose slightly to US$155.9 billion, beating the analysts’ prediction of US$150.6 billion.
“We’re really going to carry the positive momentum into 2015,” Chief Financial Officer Chuck Stevens said. “We expect both aggregate earnings and profit margins to improve in all of our automotive regions.”
Stevens said the company’s core earnings performance for the year was strong when recall costs are excluded. The company earned US$6.5 billion before interest and taxes last year, and that would have been more than US$9 billion without the recalls, he said. Recalls, he said, cost the company about US$1.10 per share.
In North America, GM made US$6.6 billion before taxes, 11 percent below 2013. That will bring record profit-sharing checks of about US$9,000 for each of the company’s 48,400 eligible union factory workers later this month. To reward employees, GM backed out recall costs and measured the profit-sharing based on core earnings.
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