General Motors' full-year EBIT-adjusted loss in Europe was US$0.7bn, "an improvement of $1.3bn over 2010", after an EBIT-adjusted loss of $0.6bn in the fourth quarter, including $0.2bn of restructuring costs, matching last year’s results, the automaker announced on Thursday (16 February).

Analysts had earlier forecast a loss of around $1bn.

Nonetheless, on a global basis, GM booked 2011 calendar year net income of $7.6bn, or $4.58 a share, up 62% from $4.7bn, or $2.89 a share, in 2010. 

Revenue rose 11% to $150.3bn from $135.6bn in 2010.  Full-year earnings before interest and tax (EBIT) adjustment was $8.3bn compared with $7.0bn in 2010.

“In our first full year as a public company, we grew the top and bottom lines, advanced our global market share and made strategic investments in our brands around the world,” said GM chairman and CEO Dan Akerson in the results statement.

“We will build on these results as we bring more new [models] to market and make GM a far more efficient global team.

"This includes reducing our break-even level in Europe and South America and driving higher revenues around the world.”

Reducing break-even is widely expected to be achieved by reducing plant capacity and the Opel plant in Bochum, Germany, and the Vauxhall factory at Ellesmere Port in England have been cited as possibilities but there will clearly be a battle over Bochum.

Rainer Einenkel, head of the factory’s works council, told Bloomberg News he’s determined to keep the factory open: “We have binding contracts with Opel and General Motors, which protect us from plant closures and layoffs,” Einenkel said, adding that closure had been threatened on numerous occasions in the past. “It’s as simple as this: We will not let our factory be shut down.”

UK industry observers have suggested Ellesmere Port is running at only 70% of capacity with some of its products being discounted heavily though the plant is very efficient and productive.

The automaker said: "General Motors and Vauxhall are, and have always been, in regular discussion with government. "Management, the works council and the supervisory board of Opel/Vauxhall are jointly discussing a strategy to get General Motors' European unit, Opel/Vauxhall, profitable again. Our employees and the public will be kept informed as decisions are being taken."

GM closed its Belgian plant in Antwerp at the end of 2010 and a Vauxhall car plant at Luton a decade earlier. Sources within GM have been quoted recently as saying the cuts two years ago - Antwerp and 7,000 jobs - did not go deep enough and more radical surgery is now necessary,

Fourth Quarter

Revenue rose 3% to $38.0bn and net income was flat at $0.5bn, or $0.28 per share, including a net loss from special items of $0.2bn or $0.11 per share. 

In the fourth quarter of 2010, GM’s net income was $0.5bn, or $0.31 per share, including a net loss from special items of $0.4bn or $0.21 per share. 

EBIT-adjusted was $1.1bn in the fourth quarter of 2011, compared with $1.0bn in Q4 2010.  Q4 2011 includes the impact of restructuring charges of $0.3bn.

GM’s fourth quarter 2011 special items included impairment charges related to goodwill and the investment in Ally Financial and gains related to the Canadian Health Care Trust (HCT) settlement, the reversal of deferred tax asset valuation allowances in Australia and the extinguishment of debt.  

Regional Results

GM North America (GMNA) reported EBIT-adjusted profit of $1.5bn in the fourth quarter of 2011 compared with $0.8bn in 2010.  Full-year EBIT-adjusted was $7.2bn in 2011 compared with $5.7bn the previous year.

Based on this 2011 performance, the automaker will pay profit sharing of up to $7,000 to 47,500 eligible hourly employees.

GM Europe (GME) reported an EBIT-adjusted loss of $0.6bn in the fourth quarter of 2011, including $0.2bn of restructuring costs, matching last year’s results. Full-year EBIT-adjusted was a loss of $0.7bn in 2011, an improvement of $1.3bn over 2010.

GM International Operations (GMIO) reported EBIT-adjusted profit of $0.4bn in the fourth quarter of 2011 compared with $0.3bn in 2010.  Full-year EBIT-adjusted was $1.9bn in 2011 compared with $2.3bn in 2010.

GM South America (GMSA) reported an EBIT-adjusted loss of $0.2bn in the fourth quarter of 2011, including $0.1bn in restructuring costs, compared with EBIT-adjusted of $0.2bn in 2010. Full-year EBIT-adjusted was a loss of $0.1bn in 2011 compared with EBIT-adjusted of $0.8bn in 2010.

US pensions

GM said its US defined benefit pension plans earned asset returns of 11.1% in 2011 and ended the year 88% funded largely unchanged from 89% funded a year ago.

The on Thursday said it was taking further steps toward its goals of "de-risking and fully funding its US pension plans".

From 30 September, 2012, GM will freeze its defined benefit pension plan for US salaried employees, who instead will receive contributions to a defined contribution plan, or 401(k).

"This initiative will affect GM's US salaried employees hired prior to 1 January, 2001, GM said. "Salaried employees hired after that date are already covered by a defined contribution plan."

2012 Outlook

GM expects to increase its top line revenue year over year in an expanding global automotive industry.  It also expects continued pricing improvement with cost inflation well contained while product mix and pension expense are expected to be unfavourable.   

Capital spending in 2012 is expected to be in the range of $8bn as the company continues to "aggressively" invest in new products and technologies.

“We are executing an aggressive product plan that will give customers around the world even more reasons to purchase a General Motors vehicle,” said CFO Dan Ammann.

“Behind the scenes, we are working hard to eliminate complexity and cost throughout the organisation to increase margins in all of our regions, and return Europe and South America to profitability.

"Overall, we have made good progress and we have more work to do.”