GM earnings, especially in the U.S., reflected growing demand for SUV and pickups.
One-time charges took a toll on GM’s 2016 earnings, but the maker still managed to beat expectations for the full year, it reported Tuesday morning.
And booming North American demand for high-margin pickups and sport-utility vehicles translates into good news for U.S. workers. Hourly employees represented by the United Auto Workers Union will take home an average $12,000 in profit-sharing, an all-time record.
“It was just a truly outstanding year,” GM Chief Financial Officer Chuck Stevens said, adding that despite concerns U.S. sales will slip slightly, “We expect 2017 to be a very strong year from a company perspective and another year of 10% or more in profit margins in North America.”
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For the full year, GM’s net income declined 2.6%, to $9.43 billion, or $6.12 per share. Last year, it earned $9.68 billion. Even with the slight drop, the nation’s largest automaker exceeded Wall Street’s consensus forecast of $6.01 per share.
CFO Stevens: "a truly outstanding year."
For the fourth quarter, GM took a much more substantial hit, earnings tumbling 70%, to $1.8 billion, or $1.28 per share – which was still well above the consensus forecast of $1.17 per share.
The slide reflected a variety of one-time charges, including $300 million in unfavorable foreign exchange rates and $100 million in legal charges related to recalls. GM also booked a $4 billion one-time gain during the fourth quarter of 2015 related to its European assets.
Putting aside those one-time adjustments, CFO Stevens had a positive assessment on the October-December quarter, declaring, “Solid results in the fourth quarter capped another record year of earnings and beat the commitments we outlined for 2016.”
Revenues for the full year surged by 9.2%, to $166.4 billion. That reflected a number of factors, including the shift in demand from passenger cars to higher-priced light trucks. For the industry, as a whole, pickups, utes and vans now account for nearly two of every three new vehicles sold in the United States. GM also made a concerted effort last year to pull back from low-margin fleet sales to focus on the more profitable retail market – albeit suffering a slight slip in overall market share.
Worldwide, however, GM joined the exclusive list of manufacturers that have sold 10 million or more vehicles in a single year, with its volume up 1.2 percent. It ended 2015 in third place, behind Volkswagen, which took the global sales crown away from Toyota.
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In the North American market, adjusted pre-tax earnings jumped to $12 billion, up from $11 billion in 2015. That’s good news for UAW workers whose profit-sharing depend on what happens in the U.S. At $12,000 per worker, those checks will be $1,000 larger than they were for 2015.
“Today’s performance bonus announcement of a maximum of $12,000 each rewards our members’ dedication and commitment to building some of the most popular and high-quality vehicles in the world,” declared Cindy Estrada, the UAW Vice President overseeing union operations at GM. “They deserve every penny of that collectively bargained bonus check.”
Not everything worked out as planned for GM in 2016. The maker had hoped to finally claw its way back into the black in Europe, where it has been losing money for nearly two decades. It still posted $257 million in pre-tax red ink, but that compared with an $813 million loss for 2015.
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Stevens noted that the Brexit vote in the UK cost $300 million because of the weakened British pound. And he warned it could have a similar impact on GM’s European earnings in 2017.
GM also lost $374 million in a Latin American market beset by financial and political turmoil, especially in Brazil and Argentina, its two largest national markets. But that deficit was down from the $622 million GM lost there in 2015.
Other foreign subsidiaries, grouped under the International Operations banner, delivered $1.14 billion in pre-tax profits, slightly off from the $1.4 billion reported in 2015.
And the maker’s lending arm, GM Financial, saw earnings climb to $913 million, up from $837 million the year before.
GM reported earnings a day after rival Toyota announced its net profit for the third fiscal quarter tumbled 26%, to $4.3 billion. Toyota reports on a fiscal year ending March 31, and it is now forecasting a 12-month total of $15.08 billion. Late last month, meanwhile, Ford Motor Co. reported net income of $4.6 billion for all of 2016, a 38% year-over-year decline.
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