GM posts biggest annual profit in more than a decade
Thursday, February 24, 2011; 10:57 PM
Less than two years after emerging from bankruptcy, General Motors announced on Thursday its largest annual profit in more than a decade as it gained market share and rolled out a new lineup of cars.
Sales during the past fiscal year totaled $136 billion, and the company's earnings hit $4.7 billion, making it the most profitable year for the automaker since 1999. The strong performance also benefited about 45,000 GM hourly employees, who will each receive $4,300 as part of the company's profit-sharing plan.
Meanwhile, chief executive Dan Akerson said models such as the much-hyped, battery-powered Chevrolet Volt have helped shift consumer perceptions of the brand. The company said its cars have captured about one-fifth of the market in the United States, its highest share since 2008.
"We know we should still have a lot to do, and we plan to continue to build on our progress," Akerson said in a conference call with analysts and reporters. He called the past fiscal year "foundation building."
Taxpayers have a vested interest in GM's future after the federal government spent $50 billion to prop up a company that had been hemorrhaging money for years as Asian competitors launched smaller, more fuel-efficient vehicles. GM emerged from bankruptcy in July 2009 and returned to the stock market in November, raising $20 billion in the largest initial public offering in U.S. history. In GM's announcement yesterday, the company said the government's stake in the company has dropped from 61 percent to 27 percent.
"GM has shown a remarkable improvement, not only in their financials but also in their product lineup in a very short period of time," said Jesse Toprak, vice president of industry trends for TrueCar.com.
But the results were not enough for Wall Street. At one point Thursday, GM stock slid below its initial offering price of $33 per share. It ended the day down 4.5 percent, or $1.57, at $33.02.
Some of the decline might be related to rising oil prices, which investors worried could dampen consumers' appetite for GM's trucks and sport-utility vehicles. Akerson said the automaker began making contingency plans for a surge in oil prices even before its public offering and is expecting fuel to become more expensive in the long run.
"It has come a little bit earlier, maybe than the industry or the economy or the world economy expected it or wanted it," he said. "So we're going to have to react."
Analysts also were concerned about the cost and pace of launching new models. GM boostedits marketing costs by $400 million during the fourth quarter to introduce vehicles such as the Chevrolet Cruze and the Volt, spending that ate into its bottom line. But slowing the pipeline for new vehicles this year could also hurt sales. "When you have older vehicles, you have to increase incentives to keep selling them," said Jeremy Anwyl, chief executive of Edmunds.com.
Meanwhile, Toyota announced that it was recalling an additional 2.1 million vehicles because of problems related to unintended acceleration. The company said unsecured or ill-fitting floor mats could trap the accelerator, causing the car to speed up without the driver pushing the pedal.
The recall came after the U.S. Department of Transportation reviewed 400,000 pages of Toyota documents. The agency closed its investigation into pedal entrapment for the automaker after Thursday's recall.
Staff writer Peter S. Whoriskey contributed to this report.