DETROIT—Strong earnings in North America and China and a reversal of fortunes in Europe powered General Motors to a record net profit of $9.7 billion last year.
The profit more than doubled GM’s 2014 earnings and was aided by a $3.9 billion fourth-quarter accounting gain because prospects for turning a profit in Europe are good. The company expects to break even there this year.
Excluding special items, GM earned $5.02 per share for the year, beating Wall Street estimates of $4.82. Profits were fueled by strong SUV and truck sales largely in North America. GM benefited from gas prices at or below $2 per gallon for much of the year, which pushed buyers toward larger, more profitable vehicles.
Full-year revenue fell just over 2 per cent to $152.4 billion, but still beat analyst estimates of $144.9 billion.
Earnings were so strong that most of GM’s 49,600 hourly workers will get $11,000 profit-sharing checks on Feb. 26. The checks were based on North American pretax earnings, which hit a record of just over $11 billion for the year.
Investors reacted favourably to the news. GM shares were up 40 cents to $30.05 in premarket trading Wednesday about an hour ahead of the market open.
“We continue to strengthen our core business, which is laying the foundation for the company to lead in the transformation to personal mobility,” CEO Mary Barra said in a statement.
GM recently invested $500 million in ride-hailing service Lyft and has announced plans to start its own car-sharing services in metro areas worldwide as it prepares for the next generation of transportation.
For the fourth quarter, GM posted a $6.3 billion net profit. Without special items, the company made $1.39 per share, beating estimates of $1.20. Fourth-quarter revenue was flat at $39.6 billion, just below Wall Street estimates.
In Europe, GM lost $298 million before taxes, narrowing the loss from last year. International operations including China made $408 million, while the company lost $47 million in South America.
Chief Financial Officer Chuck Stevens said he wasn’t worried about the full year drop in revenue, blaming currency fluctuations for about a $10 billion decline. “Size for size sake is not something that drives us,” he said. “Growing profitability is much more important to us than growing revenue.”
The company, he said, also doesn’t expect an economic downturn in the U.S. anytime soon because economic fundamentals are still strong. Still, the company will maintain a low break-even point, seek cost efficiencies and control inventory levels to prepare just in case. “We believe we are well positioned for the downturn. We just don’t think it’s going to happen anytime soon.”