General Motors Corp. reported a profit on Wednesday of $950 million for the fourth quarter of 2006, a big turnaround from a loss of $6.6 billion a year ago, due to cost cuts, higher automotive revenues and a gain on the sale of majority stake in its finance division.
DETROIT (AP) — General Motors Corp. reported a profit on Wednesday of $950 million for the fourth quarter of 2006, a big turnaround from a loss of $6.6 billion a year ago, due to cost cuts, higher automotive revenues and a gain on the sale of majority stake in its finance division.
The world’s biggest automaker, which is in the midst of a massive overhaul that includes shedding thousands of jobs and closing plants to become more competitive with Asian automakers like Toyota Motor Corp., wound up with a loss of $2 billion for all of 2006 compared with a restated loss of $10.4 billion in 2005.
Its profit without special items fell short of Wall Street expectations, however, and its shares slipped by midafternoon.
Chief Financial Officer Fritz Henderson said despite the fourth-quarter profit, no one at GM is declaring victory over the company’s financial woes.
He would say only that he expects GM’s year-over-year performance to improve in 2007, and he would not predict whether the company would continue to be profitable through the year.
“The objective is to build a successful and profitable enterprise going forward,” he told reporters Wednesday morning after the earnings report was released.
The fourth-quarter results included $770 million in special items attributed mainly to the sale of a 51 percent stake in GM’s financial arm, General Motors Acceptance Corp., to an investment group led by Cerberus Capital Management. But the Detroit automaker said it would have made $180 million in the quarter without the GMAC proceeds.
Henderson said GM’s automotive operations performed better than expected for the quarter with increased revenue in North America due to higher transaction prices and higher sales volumes and revenues overseas.
Worldwide, the company said it made $228 million selling cars and trucks for the quarter and $422 million for the calendar year. But its North American automotive operations, while vastly improved, lost $14 million for the quarter and $779 million for the year.
The company also cut structural costs by $6.8 billion last year due mainly to buyouts and early retirement offers accepted by more than 34,000 hourly workers. It expects to reap the results of $9 billion in cost cuts this year, due mainly to more than 34,000 hourly workers accepting buyout and early retirement packages.
But GM still is losing money in North America and has $47.4 billion in employee health care and other long-term liabilities, as well as other challenges that will have to be addressed at the bargaining table in contract talks this year with the United Auto Workers, Henderson said. He would not answer questions about what GM would seek in the contract talks.
“We still expect to have negative cash flow in 2007,” he said.
GM’s fourth-quarter profit amounted to $1.68 per share with special items, and 32 cents per share without them. A dozen analysts polled by Thomson Financial predicted earnings of $1.19 per share, excluding special items.
GM’s financial results were delayed by accounting troubles and last year’s sale of the GMAC stake.
Its revenue for the quarter declined to $51.2 billion from $51.7 billion in the last quarter of 2005. GM attributed the decline to the exclusion of GMAC revenue starting Dec. 1.
For the year, GM’s loss amounted to $3.50 per share versus a loss of $18.42 a share a year earler. Annual revenue rose to $207 billion from $195 billion.
Also Wednesday, GM said that as part of the GMAC sale, it will pay $1 billion to GMAC by the end of the month to bring up its equity to where it was on Nov. 30 when the deal closed. The payment is necessary because of deterioration in GMAC’s residential mortgage results due in large part to subprime loans — those made to people with poor credit histories — and earnings restatements by GMAC, GM said.
GM also said it would restate its net earnings from the first three quarters of 2006 back through calendar year 2002 due to the accounting problems.
The changes ranged from an 8.7 percent decrease in 2003 to a 10.2 percent increase in 2002.
GM shares fell 30 cents to $30.21 in afternoon trading on the New York Stock Exchange. They have traded in a 52-week range of $19 to $37.24.