Earnings Preview: General Motors Co.

AP News
Posted: Feb 23, 2011 6:25 PM
Earnings Preview: General Motors Co.

General Motors Co., the largest U.S. automaker, is scheduled to report its fourth-quarter earnings before the stock market opens on Thursday.

WHAT TO WATCH FOR: Industry analysts expect a net profit of around $955 million for the quarter, lifting the full-year profit to more than $5.1 billion on strong sales in China and new vehicles in the U.S.

The fourth-quarter results could fall below the two previous two quarters because of higher costs to bring the new models to market and increased vehicle engineering and development expenses.

If last year's results come in as expected, they would mark GM's first profitable year since 2004, and its best since posting a $6 billion profit in 1999 when its factories were cranking out high-profit sport utility vehicles and pickup trucks.

But from 2004 through 2009, GM was in a state of perpetual restructuring, trying to downsize its work force and shrink its factory capacity to match falling demand for its vehicles. The company lost more than $80 billion during the period and almost ran out of cash in 2008, when the government began a bailout that eventually reached $49.5 billion.

With government financing, GM went into bankruptcy protection in June 2009, leaving a quick 40 days later cleansed of burdensome debt and labor costs. With lower costs and new models such as the Chevrolet Equinox _ a small SUV that seats five _ GM began its comeback.

It lost $4.4 billion in the second half of 2009, but began making money as auto sales started to recover last year, posting $4.2 billion in profits during the first nine months.

It touted the profits to convince investors to buy stock in the revamped company. It then returned to the stock market in an initial public offering in November.

WHY IT MATTERS: Strong GM profits mean the U.S. government will get more of its bailout money back. The government sold GM shares in the IPO and now has been repaid $23 billion. But it needs $26.4 billion more to recoup its whole investment. The government still owns 500 million shares of GM common stock, which would have to sell for roughly $53 per share to get all the money back. Also, the downsized GM is still a major employer with 209,000 workers worldwide.

WHAT'S EXPECTED: Analysts polled by FactSet expect earnings of 49 cents per share for the quarter on revenue of $34.3 billion. For the full year they expect the company to make $2.86 per share on revenue of $132.8 billion

LAST YEAR'S QUARTER: In the fourth quarter of 2009, GM lost $3.4 billion on revenues of $32.3 billion.