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 The poor showing triggered an early drop in GM's stock price by as
much as 2.5 percent, before it recovered to gain 0.2 percent to
$35.31 in afternoon trading.
It was the first quarterly earnings report for GM's new management
team led by Chief Executive Mary Barra, the 52-year-old electrical
engineer and GM "lifer" who became the industry's first female CEO
last month.
"We have more work to do and our sense of urgency won't let up one
bit," Barra said on a conference call.
Excluding one-time charges, GM earned 67 cents a share, 21 cents
less than expected by analysts surveyed by Thomson Reuters I/B/E/S.
The fourth quarter was bogged down by $200 million in one-time
charges stemming partly from the Chevrolet brand's exit from Europe
and a plan to stop manufacturing cars in Australia. GM has said it
will spend another $1.1 billion in 2014 to restructure operations in
Europe and South America.
Citi analyst Itay Michaeli said the fourth quarter was
disappointing, but GM's projection for a modest profit increase this
year remained unchanged from its update to investors in January.
"I don't think the story will change much despite what seems to be a
disappointing finish to 2013 because the regions that are hurting
the most are now the very regions where GM is actually restructuring
aggressively," he said.
Nevertheless, Michaeli and other analysts said Wall Street's
consensus estimate for GM's 2014 profit — currently at $4.16 a share — will likely be revised lower after the weak fourth quarter. Morgan
Stanley analyst Adam Jonas said the downward revision could be as
much as 10 percent.
GM executives on Thursday also cited pressures in regions outside
its core North American market.
Chief Financial Officer Chuck Stevens said the largest U.S.
automaker faces increased competition in China, but aims to offset
pricing pressures there with new models and maintain 9 percent
profit margins.
The international regions outside China also remained under
pressure, he said. These included countries in Southeast Asia, the
Middle East, India and Australia.
Stevens warned that the South American market had significantly
deteriorated in recent weeks, but did not change the company's
outlook for a higher profit there this year.
Executives said GM should see the benefits of its restructuring
efforts starting next year and North American margins would rise
over the next couple of years.
Barra said she saw opportunities to build GM's brands, to grow in
China and to better control costs.
RBC Capital Markets analyst Joseph Spak said in a research note that
GM's strength in North America, where it has been able to raise
prices, "should really shine through" in the second quarter, a
period he called "make or break" for the Detroit company.
RESTRUCTURING
Stevens attributed the earnings miss to analysts not fully
accounting for restructuring relating to plans to close a plant in
Bochum, Germany later in the year, as well as a higher-than-expected
tax rate.
"Our view is that the sell-side consensus didn't comprehend that
restructuring," he told reporters. "The final announcement
associated with that wasn't done until early December. Due to that,
we needed to book some of the restructuring costs, primarily related
to the severance portion of that program."
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Net income rose to $913 million, or 57 cents a share, from $892
million, or 54 cents a share, in the year-earlier quarter.
The operating profit rose 58 percent to $1.9 billion.
Revenue in the quarter rose 3 percent to $40.5 billion, below the
$41.08 billion expected by analysts.
GM's North American operating profit was $1.88 billion, up from
$1.14 billion a year earlier, but short of the $2.04 billion
expected by analysts surveyed by Reuters.
The increased profit was driven by stronger pricing for its
redesigned full-size pickup trucks, the Chevrolet Silverado and GMC
Sierra. Pricing accounted for a $1.2 billion gain in the quarter,
but costs of $500 million were higher than Citi's Michaeli had
expected.
Buckingham Research analyst Joseph Amaturo said the negative
catalysts for the stock were already priced in and investors should
"aggressively buy" on any declines because the redesigned pickups
will boost profits significantly in the second half of 2014 and all
of 2015.
WEAKNESS IN SOUTH AMERICA
The company's international operations, which includes China, earned
$208 million, down from $676 million a year earlier, as businesses
outside China accounted for a loss of $200 million. Analysts had
expected a profit of $310 million.
However, Michaeli was concerned about weakening even in China, the
world's largest automotive market, as profit margins fell to 7.6
percent from 9.4 percent in the third quarter.
South American profit of $27 million fell far short of the $151
million analysts had expected.
"The risk profile of South America has increased significantly over
the last several weeks," Stevens said. "The devaluation of the peso
in Argentina and fundamentally the economy is shut down in
Venezuela, so that's going to be an area that we're going to have to
manage through."
Losses in Europe, meanwhile, shrank by more than half to $345
million, smaller than the $399 million loss analysts had expected.
Stevens stood by the company's target to break even in the region
financially by mid-decade.
Still, Stifel analyst James Albertine said in a research note that
GM's overhaul of Europe may be more time-consuming, expensive and
risky than the company is signaling.
For the full year, GM reported a net profit of almost $3.8 billion,
down from almost $4.9 billion in 2012. Sales rose 2 percent to
$155.4 billion.
GM ended the year with $38.3 billion in total automotive liquidity,
up $1 billion from the end of the third quarter.
The automaker ended 2013 with its $71.5-billion U.S. defined benefit
pension plan about 90 percent funded. The U.S. plans ended the year
underfunded by $7.3 billion, down by almost half from $14 billion at
the end of 2012.
(Editing by Jeffrey Benkoe and
Bernadette Baum)
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