General Motors Co reported a weaker-than-expected fourth-quarter profit on Thursday as results in North America, Asia and South America disappointed, sending shares down about 2 per cent in morning trading.
Several analysts said Wall Street’s profit consensus for the No. 1 U.S. automaker in 2014 was likely to come down.
Citi analyst Itay Michaeli said the quarter was disappointing, but GM’s story remained little changed from January, when it said pretax profit would rise modestly this year, and margins likely stay flat until 2015.
“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.
GM said last month that modest growth in the U.S. and China markets in 2014 would help pay for $1.1-billion in restructuring costs in other harder-hit regions.
Shares were down about 2 per cent at $34.51 in early trading on the New York Stock Exchange.
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.
GM Chief Financial Officer Chuck Stevens said that while Europe was improving, the downside risk in South America was rising as Venezuela and Argentina dragged down results. The international regions outside China remained under pressure, he said. These included countries in Southeast Asia, the Middle East, India and Australia.
He 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,” Stevens 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.”
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 quarter included about $200-million in special items related to the exit of the Chevrolet brand from Europe, the end of manufacturing in Australia, offset by a gain on the sale of equity in Ally Financial and other items.
Excluding the items, GM earned 67 cents a share. Analysts polled by Thomson Reuters I/B/E/S had expected 88 cents a share. The operating profit rose 58 per cent to $1.9-billion.
Revenue in the quarter rose 3 per cent 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.
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 automaker market, as profit margins fell to 7.6 per cent from 9.4 per cent 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.
GM ended the year with $38.3-billion in total automotive liquidity, up $1-billion from the end of the third quarter.