GM CEO Mary Barra put a positive spin on the maker's latest earnings.

General Motors saw earnings surge 22.2% during the last three months of 2014, driven by strong U.S. and Chinese sales – but the maker also reported a sharp decline in its full-year net income which was hammered by the cost of major recall problems.

GM closed 2014 with fourth quarter earnings of $1.1 billion, or $0.66 a share, despite one-time items that reduced earnings by $900 million, or $0.53 a share. By comparison, the maker earned $0.9 billion, or $0.57 a share, during the final three months of 2013.

“A strong fourth quarter helped us deliver very good core operating results in 2014 despite significant challenges we and the industry faced,” said GM CEO Mary Barra in a prepared statement. “By keeping our customers at the center of all our decisions, we addressed those challenges head-on and outlined a customer-focused strategic plan that will guide our company well into the future.”

Factoring out those special items, GM would have earned $1.99 billion, or $1.19 a share. That ran well ahead of the consensus forecast of $0.85 a share, according to a list of analysts surveyed by Zacks Investment Research.

GM was helped by several factors towards the end of the year, notably by the ongoing recovery of the American market. And, with fuel prices plunging, demand surged for some of the maker’s most profitable products, such as its Chevrolet Silverado pickup truck. GM also saw strong interest in its new midsize trucks, the Chevy Colorado and GMC Canyon.

GM also fared well in China, where its stake in a variety of joint ventures generated $0.5 billion in fourth-quarter income, up from $0.4 billion during the same period the year before. In turn, that helped GM International Operations deliver $0.4 billion in earnings before taxes and interest – or EBIT – of $0.4 billion, double the prior year’s number.

For the full year, GM China income rose about $15%, to $2.1 billion. The maker is now the second largest in China, just behind rival Volkswagen AG. VW also became the world’s second best-selling automaker in 2014, largely due to its strong performance in China.

GM’s overall improvement in earnings came despite the fact that GM revenues for the quarter fell to $39.65 billion, down from $40.05 billion. And analysts had anticipated the figure would reach $40.01 billion for the latest quarter.

The Detroit-based automaker, the world’s third-largest, continued to face some serious challenges as 2014 drew to a close. During the year, GM issued more than 60 recalls covering around 30 million vehicles – a record for a single manufacturer.

“Core automotive operating performance improved in 2014, but results were more than offset by incremental recall and restructuring costs, and a net loss from special items,” the maker said in its earnings statement.

Those recalls alone cost the maker $2.8 billion last year. As a result, adjusted earnings for 2014 tumbled 26.3% to $2.8 billion, or $1.65 a share, down from $3.8 billion, or $2.38 a share, for all of 2013.

Other issues hurt GM earnings last year, including the maker’s ongoing struggles in Europe where increased restructuring costs resulted in a $1.4 billion loss, compared to a deficit of $0.9 billion in 2013. The maker has said it believes it is finally on track to get back in the black over the next several years.

(FCA sees profits decline in 2014. For more, Click Here.)

GM  ended the year with a profit margin of 9%, meanwhile, and CFO Chuck Stevens said in a briefing he expects that to reach at least 10% this year.

Ahead of the earnings release, S&P Capital said it “reiterates” a “strong buy option” for GM shares.

(Click Here for details about Ford’s earnings.)

Separately, Morgan Stanley analyst Adam Jonas advised investors, “We may be looking at as close to an alignment of forces in GM’s favor as we’re going to see this decade.”

But analysts warn there some potential downsides. Europe remains an uncertainty, while there are also challenges in Latin America – and even in China where the explosive growth of the last 15 years seems to be slowing. Recalls also remain a factor. While GM has slowed the pace of its safety-related actions in recent weeks, it still faces a number of lawsuits and an ongoing investigation by the U.S. Justice Department into the handling of its ignition switch recall – which GM acknowledges was delayed by a decade.

(To see more about Ford’s $6,900 profit-sharing checks this year, Click Here.)

The Detroit maker’s earnings were announced shortly after rival Toyota, the world’s largest automaker, released its own numbers. Toyota said it earned $5.1 billion during the October to December quarter, the third in its fiscal year, and advised it will do better than previously forecast for the final quarter.

Among other Detroit makers, the Chrysler Group, now called FCA US, said yesterday it earned $669 million for the fourth quarter, and $1.2 billion for all of 2014. Ford’s net income plunged to just $52 million for the final three months, and $3.19 billion for all of 2014.