GM Q4 earns $1.1B, full-year $2.8B after recall cost
General Motors (GM), last of the big U.S. automakers to report earnings, said today it had a net income of $1.1 billion in the fourth quarter, up 22.2% from $900 million a year ago.
Its full-year net income was $2.8 billion, after $2.8 billion recall costs globally and $1 billion in restructuring costs. That adjusted net was down 26.3% from $3.8 billion a year ago.
GM said it expects to increase its second-quarter common stock dividend 20% to 36 cents per share. Shares closed up $1.85, or 5.4%, at $35.83. The $0.30 dividend translates to a yield of 3.53%.
Ford Motor announced Jan. 28 plans to boost its dividend 20%, to $0.15 per share. At the current divided of $0.125, the yield was 3.23% at year-end 2014.
"The long-awaited cash story may finally be playing out," said analyst Joe Spak at RBC Capital Markets. "GM announced plans to raise the dividend ... and also indicated it could evaluate further return of cash" in the second half, "once more clarity on the recall is received," he said in a note to clients.
GM previously warned investors and analysts it could face $400 million to $600 million in recall-related compensation for victims of crashes due to faulty ignition switches in 2.35 million small cars in North America that GM recalled a year ago. The switches can fail and disable air bags.
The GM-funded, but independently run, GM victims' compensation fund has approved 51 claims for deaths. If the fund awarded an average $9.1 million, equal to a recent Department of Transportation calculation of what's called the value of a statistical life as of 2012, GM would have to pay $464 million.
That doesn't take into account 77 approved claims for injuries, nor 110 pending death claims and hundreds of not-yet-decided injury claims.
GM's earnings per share in the quarter were 66 cents, including a loss of 53 cents per share from special items, including the costs of recalling millions of cars last year.
Operating profit margin — that is, before interest and taxes — was slightly more than 9%, CFO Chuck Stevens said in a briefing, and should rise to 10% or more this year.
And GM said it will pay out profit-sharing checks averaging $9,000 to approximately 48,400 eligible hourly workers.
Auto industry analyst Ryan Brinkman at JPMorgan noted that GM had "better-than-expected 4Q profits," partly because of "a surprise profit in South America despite tough macro conditions."
He also commented that full-year earnings per share of $1.19 were far above most analysts' consensus before the announcement. He had forecast 81 cents, 2 cents less than consensus.
Spak had forecast 80 cents per share for the quarter.
North America and China were strong profit contributors, Stevens said. Russia remains "challenging," he said. The economy there is plunging as oil prices drop. And Venezuela is a bigger issue because, U.S. automakers say, government rules no longer allow the car companies full control of their operations there.
Results by region:
• North America posted operating profit of $2.2 billion in the fourth quarter, up from $1.9 billion the year before. For all of 2014, North American operations had earnings before taxes and interest of $6.6 billion after subtracting $2.4 billion in recall-related costs.
• GM International Operations reported EBIT-adjusted profit of $400 million in the quarter, twice last-year's number. Full-year, result was $1.2 billion, up from $1.3 billion.
• GM Europe reported EBIT-adjusted quarterly loss of $400 million, including $100 million for restructuring. Full-year loss was $1.4 billion, including $700 million for restructuring. The previous year GME lost $900 million, including $200,000 million for restructuring.
• GM South America surprised with a profit of $100 million in the quarter, vs. break-even a year earlier. Full-year was a loss of $200 million, compared with a profit of $300 million in 2013.
GM was the last of the Detroit automakers to report.
FCA US, formerly Chrysler Group, reported Tuesday it had fourth-quarter net income of $669 million, and $1.2 billion for all of 2014, after subtracting $1.2 billion for one-time items.
Ford Motor on Jan. 29 reported net of just $52 million in the fourth quarter, and full-year net of $3.19 billion. Both were down significantly from the year-earlier period due to charges for restructuring business operations in other countries, and costs in money and sales of retooling factories to launch the 2015 F-150 pickup.