Tuesday, June 19, 2018
Business

GM's profits soar to record high

DETROIT — Just two years after it was rescued and reconstituted through bankruptcy and a government bailout, General Motors cruised through 2011 to post the biggest profit in its history.

The 103-year-old company, under new management, cut costs by taking advantage of its size around the globe. And its new products boosted sales so much that it has reclaimed from Toyota the title of world's biggest automaker.

GM may have a hard time breaking this record in 2012 because of losing money in Europe and South America and U.S. sales growth slowing in the last three months.

But the company's performance in North America and Asia still helped it earn $7.6 billion for the year, beating the record of $6.7 billion set during the truck and SUV boom in 1997.

The profit won't stop the debate about spending $49.5 billion in taxpayer dollars to save GM. But it did drive up the company's stock price, which could help the government get more of its money back.

The bailout of GM and Chrysler Group, begun by President George W. Bush and finished by President Barack Obama, remains a major issue in this year's presidential campaign.

GM, which released its earnings Thursday, performed best in its home territory, posting a $7.2 billion pretax profit in North America. The numbers were so good that 47,500 blue-collar workers will get $7,000 profit-sharing checks, the maximum allowable under their new union contract. International Operations, which includes Asia, made $1.9 billion before taxes, but that was down from 2010.

GM's cost cuts and its outlook for 2012 helped to push up the stock price by almost 9 percent to $27.08. The company said it trimmed costs by $500 million in the fourth quarter alone mainly by consolidating advertising agencies and engineering operations. A prediction that costs wouldn't rise this year wowed investors, especially since other automakers have forecast rising costs, said Itay Michaeli, an analyst for Citi Investment Research.

"That was a very pleasant surprise," he said.

GM expects to charge more for its cars and trucks this year but warned that the prices could be pressured as the market shifts toward smaller, less-expensive vehicles.

CEO Dan Akerson hinted at a better year for GM in 2012, saying the company will build on its 2011 success by bringing more new products to market.

"The outlook here is quite favorable for earnings growth," Michaeli said. "They're keeping their costs really under control."

That's good news for the U.S. government, which still owns 26.5 percent of the company and needs more strong earnings to push up the stock price.

The government owns 500 million shares of GM, an exchange for the $49.5 billion bailout. Through earlier stock sales and loan repayments, the government has recouped about $22.3 billion of that money. The remaining shares would have to double in price and sell for about $53 for the government to get back the rest.

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