Largest Annual Profit Ever Posted By General Motors (NYSE: GM)
General Motors posted its largest annual profit ever, reporting earnings of $7.6 billion for 2011. GM earned $472 million in the fourth quarter, with most of the fourth-quarter revenue coming from North America. The strong annual figure is likely to boost the confidence of investors, employees and small businesses that rely on GM. Many investors are waiting for solid signs that the automaker will continue to recover before making large investments in the industry.
GM’s sales increased 13.2% over last year’s figures and average transaction prices were up 3.7%. The company has reduced its reliance on incentives to lure in customers and have cut the average rebate by 5.1%. GM’s South American divisions posted losses of $122 million for 2011.
GM’s Opel division has struggled to restructure effectively. The European division lost $562 million in the fourth quarter and had a loss of $747 million for the entire year. Barclays Capital analyst Brian Johnson said GM needs another Opel restructuring, needing to close plants, cut workers, slash material costs. and force suppliers to charge less for parts.
The Michigan economy is recovering slowly from the near downfall of GM and Chrysler in 2008 and 2009 and GM is still saddled with government ownership. The U.S. government owns almost 30% of GM’s stock and cannot sell that stock until its price reaches $51. GM’s stock is currently at little more than half of that amount, priced at $27.44. Republican presidential candidate Mitt Romney criticized the auto bailout and said the industry would have fared better had the government hadn’t intervened.
The earnings announcement comes just two and a half years after the company emerged from bankruptcy. Industry observers predicted a quick comeback after bankruptcy as the company slashed its debt, moved healthcare responsibilities to the union, cut workers and plants, and trimmed back its brand lineup. They figured that the company would have cut costs so dramatically that any increase in U.S. sales would result in massive earnings for the company.
Dan Akerson, chairman and CEO of General Motors, said in a press release, “In our first year as a public company, we grew the top and bottom lines, advanced our global market share and made strategic investments in our brands around the world.” He announced that plans are in the works to “make GM a far more efficient global team. This includes reducing our break-even level in Europe and South America and driving higher revenues around the world.”