GM posts 1st full-year profit since 2004
GM notches 1st profitable year since 2004; could it reclaim its spot as No. 1 automaker?
FILE - In this Jan. 10, 2011, Dan Akerson, CEO of General Motors, smiles during the North American International Auto Show in Detroit. General Motors said Thursday, Feb. 24, 2011, it earned $510 million in the fourth quarter and $4.7 billion last year as it continued an impressive comeback from bankruptcy.(AP Photo/Paul Sancya, file)
, On Thursday February 24, 2011, 5:06 pm EST
DETROIT (AP) -- In a remarkable financial U-turn, once-bankrupt General Motors recorded its first profitable year since 2004 and is tantalizingly close to reclaiming its title as the world's No. 1 automaker.
The company faces a bumpy road ahead: Gas prices are rising, GM has only a few new models, and its European operations are still losing money.
Still, the automaker's $4.7 billion profit for 2010 was impressive, especially considering where it has been. The company lost more than $80 billion in the five years before its bankruptcy and needed a government bailout to survive. It emerged in the summer of 2009 cleansed of huge debt and costly labor contracts, returned to the stock market in November, and managed to make money even with auto sales near historic lows.
"I'm not sure anyone would have predicted a year ago that GM will deliver net income of $4.7 billion," Chairman and CEO Dan Akerson said Thursday.
The annual profit, fueled by strong sales in China and the U.S. as the global auto market began to recover, gave GM its best year since 1999, when it made $6 billion at the height of the pickup truck and sport utility vehicle boom.
GM executives predicted the automaker would build on last year's earnings as sales continue to rise, especially in North America.
With a good performance by GM this year, the U.S. government could recover more of its $49.5 billion bailout, nearly half of which has been repaid. And GM could even retake the title of world's largest automaker, held by Toyota since 2008.
GM sold 8.39 million cars and trucks worldwide in 2010, coming within 30,000 vehicles of unseating Toyota, which has been wounded by a string of safety recalls, including another big one on Thursday. That 30,000-vehicle difference works out to a little more than a day's worth of sales for GM.
Still, a spike in oil prices because of the turmoil in the Arab world, a paltry lineup of new models because of research-and-development cuts made two years ago before bankruptcy, and losses in Europe could prove a drag on the automaker, and its stock dropped nearly 5 percent Thursday to $33.02 despite the strong earnings report.
GM has only two new models scheduled to debut in the U.S. this year, the Chevrolet Sonic subcompact and Buick Verano compact. Many of GM's top sellers, including the Chevrolet Silverado and GMC Sierra pickups, the Chevrolet Malibu midsize car and the Chevrolet Impala full-size car, haven't been updated in years.
By contrast, Chrysler rolled out 16 new or updated models last year.
David Whiston, an auto analyst with Morningstar, said GM also faces the difficult task of convincing buyers that its smaller cars -- namely the Chevrolet Cruze and the electric Chevrolet Volt, both introduced late last year -- are good enough to choose over top-selling Japanese models like the Honda Civic and Toyota Corolla.
"They do have product to go head-to-head with Corolla and Civic, but you don't know if they will be able to take meaningful share or if the American public will be prejudiced against small cars made by Detroit automakers," Whiston said.
Akerson said rising gasoline prices could actually help GM because its most recent and upcoming models are smaller and more fuel-efficient.
GM beat Wall Street estimates for the full year and the fourth quarter, when it made $510 million. That was the worst quarter of the year, mainly because GM spent millions launching the Cruze and the Volt.
But it was still the company's fourth straight profitable quarter after losing a whopping $3.5 billion in the last quarter of 2009.
The U.S. government has been repaid $23 billion of what it spent to rescue GM. It still owns 500 million shares of GM common stock and would have to sell it for roughly $53 per share to get all its money back.
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