NEW YORK (CNNfn) - General Motors Corp. Thursday capped a record-setting year in sales by posting better-than-expected fourth-quarter earnings.|
The world's largest automaker, and the first U.S. automaker to report fourth-quarter results, had net income from continuing operations of $1.15 billion, or $1.86 a diluted share, down from $1.68 billion, or $2.48 a diluted share, in the year-ago quarter.
Analysts surveyed by earnings tracker First Call expected the company to earn $1.81 a share in the latest quarter.
GM (GM) said its decline in fourth-quarter profits came from a drop in production of some of its trucks in North America and from costs related to the startup of new models in the quarter. Also, the year-ago quarter's strong earnings were due partly to the company's effort to recoup sales and production lost during strikes in June and July of 1998.
The company's European production was also lower than expected for the most recent quarter and its Hughes Electronics unit incurred increased costs due to the development of its DirecTV operations.
Revenues in the quarter rose 4 percent to $46.3 billion, even though the number of vehicles sold worldwide fell to 2.22 million from 2.27 million.
Analysts were generally pleased but not too excited about the results.
"It looks like cost savings are trending better than expected and Asia and Latin America are getting close to turning the corner," said Rod Lache, analyst with Deutsche Banc Alex. Brown. "On the negative side, Europe is having some pretty disappointing profitability."
For the year, the company had income of $5.58 billion, or a record $8.53 a diluted share, compared with $3.05 billion, or $4.32 a share, in strike-impacted 1998. Sales rose 14 percent to a record $176.56 billion.
Low market share despite strong sales
GM had record sales in the year, the best year ever for auto sales. But it lost North American market share to European and Korean manufacturers.
The number of vehicles sold rose 9.4 percent in 1999 to 8.8 million, but analysts who follow the company have been critical of GM's failure to gain market share. The company's share of the U.S. market stayed level at 28.8 percent in 1999, the first non-strike year since the 1920s that its share was below 30 percent.
Optimistic outlook for 2000 sales
GM officials said last week they expect to improve on the record 1999 sales this year, although they would not set target numbers for sales or market share.
"If you look at our production schedule, we think we ought to be able to grow our sales," said Rick Wagoner, GM's president and chief operating officer, in a press briefing at the Detroit auto show last week. "We feel good about our product, but there's no reason to put a target out there when nobody else does, and we get beat up on it."
Analysts also said that even if sales do not necessarily increase, profits have a chance to gain this year as GM and other automakers continue to improve productivity and shift production to its more profitable trucks and sport/utility vehicles.
"I think 2000 will be defined by a flattish level of sales and a better product mix," said Saul Rubin, analyst with Warburg Dillon Read, in an interview on CNNfn Thursday. "I think that better product mix will feed through to better earnings for most of the major players in the U.S. auto industry."
But, Lache said he believes GM's profits will fall slightly in 2000, and he has a neutral rating on the stock. First Call's estimate of GM profits is $8.24 a diluted share for the 2000 year compared with 1999's $8.53.
Rubin said the hit that GM took in fourth-quarter profits to roll out its popular new trucks was a good move going forward. (329KB AIFF) (329KB WAV)
The results were good news for more than 150,000 hourly employees at GM, who will receive record profit-sharing payments of about $1,775, compared with only $200 for strike-impacted 1998.
The company also said it will complete a previously announced $4 billion share repurchase program. It had already purchased $1.6 billion of the stock in the fourth quarter.
GM's stock, a component of the Dow Jones industrial average, traded early Thursday at 82-1/4, up 3/4, after opening at 82-1/2.