GM earns $2.8 billion in '14, sets $9K profit sharing
General Motors Co. on Wednesday said it earned $2.8 billion in 2014, including $1.1 billion in a stronger than predicted fourth quarter, and will pay UAW hourly workers record profit-sharing of up to $9,000.
The automaker's full-year earnings slipped 26 percent in a year with recall costs of $2.8 billion and restructuring costs of $1 billion.
Fourth-quarter net income was 66 cents a share or $1.19 a share when factoring in special items that totaled $900 million or 53 cents a share, including $800 million to repurchase preferred shares. That beat analyst expectations of 83 cents a share for the quarter and was better than the 57 cents a share (67 cents a share with special items) it earned in fourth-quarter 2013.
Quarterly results — the best pretax fourth quarter since becoming a new company in 2009 — were aided by North America where sales grew of highly profitable SUVs and trucks. GM earned $2.2 billion pretax in North America, up from the $1.8 billion earned in the same quarter a year ago.
"We had a very strong fourth quarter which really caps a year of strong core operating performance, led by our two most important markets, North America and China," GM Chief Financial Officer Chuck Stevens told reporters at the company's headquarters.
GM made $6.6 billion in North America before interest and taxes, down from a record $7.5 billion a year ago, but profit margins grew from 7.8 percent in 2013 to 8.9 percent in 2014 as it works toward 10 percent margins next year. GM said recall costs cut earnings in North America by $2.4 billion.
The automaker said based on its performance in North America that it will award 48,400 eligible U.S. hourly employees up to $9,000 in profit sharing. That figure includes a $2,000 special performance payment, according to GM. Last year, workers received profit-sharing checks of up to $7,500.
Stevens said there was no set formula used for the special adjustment to profit-sharing payments.
"Certainly the recall costs in North America had a factor, but again there was no set formula," Stevens said. "The most important aspect of the adjustment was to reflect the significant support and work, and hard work, by the entire team in driving a core operating performance in 2014."
The UAW had said it was in talks with automakers about recall issues — many on vehicles GM produced more than a decade ago — that hurt profit-sharing.
UAW Vice President Cindy Estrada, who directs the union's GM department, said the profit sharing is an important validation of hourly workers' hard work and every little bit helps.
"This profit sharing shows that General Motors recognizes that the UAW members are a key factor to a strong company and strong performance," she said in a statement.
Ford Motor Co. workers learned last week they will receive up to $6,900, down from the $8,800 a year ago. Ford's North American earnings fell because of lower volume and costs associated with vehicle launches. Hourly workers for FCA US LLC, formerly Chrysler Group LLC, will receive up to $2,750 this year, higher than the $2,500 most received a year ago. (Some got another $1,000 if plant targets were met.)
GM also said about 35,000 U.S. salaried workers will receive bonuses later this month or next month because quality, market share and financial goals were reached last year, GM spokeswoman Katie McBride said.
GM also said it intends to boost the second-quarter stock dividend by 20 percent to 36 cents a share, though GM's board of directors must approve the increase.
"Our intention to increase the dividend is consistent with our balanced capital allocation strategy and reflects the confidence we have in the growing strength of our business," GM CEO Mary Barra said in a statement.
Stockholders appeared to like the news, as GM's stock was up more than 5 percent Wednesday afternoon. GM's stock closed at $33.98 a share Tuesday.
Analysts notes to investors Wednesday said they see the dividend increase as a positive.
"We expect a strong positive reaction to today's combination of modestly better fourth quarter results and large dividend increase," Ryan Brinkman, a J.P. Morgan analyst, wrote in a note to investors.
For the year, GM earned $1.2 billion in its International Operations, about flat from a year earlier, GM Europe lost nearly $1.4 billion pretax in 2014, including a $393 million fourth quarter loss. GM posted a $869 million pretax loss in Europe in 2013. GM South America also posted a net pretax loss in 2014 of $180 million. It had earned $327 million pretax in 2013.
In the fourth quarter, GM was profitable before interest and taxes in all regions except Europe. For the quarter, GM's earnings before interest and taxes adjusted was $2.4 billion, up from $1.9 billion in fourth quarter 2013. For the year, GM's pretax adjusted earnings totaled $6.4 billion, down from $8.6 billion in 2013. Without the recalls, GM would have posted pretax adjusted earnings of more than $9 billion this for 2014, Stevens said.
GM revenue for 2014 was up slightly from 2013 at $155.9 billion.
GM earned $3.77 billion in 2013, including $913 million in the fourth quarter. The automaker had an $800-million special item in fourth-quarter 2014 tied to repurchasing 156.1 million shares of Series A preferred stock. GM spent $3.9 billion to redeem outstanding preferred shares held by the UAW Retiree Medical Benefits Trust and Canadian government.
Stevens last month said GM's 2014 results were "much better" than GM had expected for the year. Stevens told reporters that GM expects earnings and profit margins to improve in all automotive regions this year over 2014 results.
"We're going to carry the positive momentum into 2015," he said.
Some analysts are concerned about GM's plan to be profitable in Europe next year, given the uncertainty surrounding Russia and related economic and currency issues. GM said last week its Opel unit will halt production for nearly two months at its St. Petersburg plant because of low demand and the slowdown of the Russian car market.
"Russia remains a question mark for (GM Europe.) While (GM Europe) was guided to improve year-over-year, aided by lower restructuring expense, it is not clear how much of an impact Russia will have on the business," Brian A. Johnson, an analyst with Barclays Capital Inc., wrote in an investors' note last month.
Stevens said fourth-quarter European results were pulled down by Russia.
"Our expectation as we go through 2015, Russia will continue to be a headwind," Stevens said. "But we've taken and will continue to take aggressive actions to mitigate those issues, including significant reductions in the workforce, temporary shutdowns of the plant (and) pricing to offset the impact of (currency)."