General Motors has posted a greatly reduced loss for 2006.
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Including special items, its net loss was $2.0bn, or $3.50 per share last year, compared with a net loss of $10.4bn, or $18.42 per share in 2005.
GM earned record revenue of $207bn in 2006, compared with $195bn the previous year.
Net income for 2006, excluding special items, of $2.2bn, or $3.88 per share, compared with a net loss of $3.2bn, or $5.67 a share, in 2005, a $5.4bn improvement.
“We needed 2006 to be a big year, and it was,” GM Chairman and CEO Rick Wagoner said in a results statement.
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By GlobalData“Our performance last year reflects the significant progress we’ve made toward transforming GM into a more competitive, global business focused on long-term, sustainable success. It’s also validation that our strategy is working, and faster than many people thought possible.
“But nobody at GM is declaring victory, because we all know there is still a lot more work to do to achieve our goals of steady growth, solid profitability and positive cash flow generation. We’re confident that the momentum we generated in 2006 will continue to build through this year and beyond,” Wagoner added.
Net income in the fourth quarter of 2006 was $180m, or $.32 per share, excluding special items, compared to a net loss of $936m, or $1.66 per share a year ago.
Including the net favourable effect of all special items, GM’s net income was $950m, or $1.68 per share in Q4 2006, compared with a loss of $6.6bn, or $11.63 per share in 2005.
GM had revenue of $51.2bn in the fourth quarter 2006, compared with $51.7bn in the same period a year ago, with the decline more than accounted for by the exclusion of GMAC revenue from 1 December, after the financial services arm was divested to a private group of investors.
The reason for GM’s improved results was simple, Global Insight automotive group director Rebecca Lindland told just-auto. “They’re selling lots of vehicles at high transaction prices and are making more money.”
GM’s reported results for fourth quarter 2006 include special items totaling $770m after tax, or $1.36 per share primarily attributable to gains related to GMAC transaction-related items and the sale of the GM desert proving ground property, partially offset by costs related to previously announced restructuring items.
Automotive Operations
Net income from global automotive operations for 2006 improved by more than $5.7bn, totalling $422m on an adjusted basis, excluding special items (reported net loss of $3.2bn).
Adjusted net income for GM’s automotive operations in the fourth quarter 2006 was $228m (reported net income of $194m), compared with an adjusted loss of $1.2bn in the year-ago period.
GM sold 9.1m vehicles worldwide in 2006. For the second consecutive year, unit sales outside of the U.S. surpassed domestic sales with almost 5m units, or 55% of global volume.
GM Europe (GME), GM Asia Pacific (GMAP), and GM Latin America, Africa and the Middle East (GM LAAM) all set regional sales records, with GME exceeding 2m units, GMAP topping 1.25m units, and LAAM surpassing 1m units for the first time.
GM North America (GMNA) posted a $5bn earnings improvement in 2006, with an adjusted net loss of $779m (reported net loss of $4.6bn). In Q4 2006, GMNA recorded its fourth consecutive quarter of more than $1bn improvement in adjusted earnings. GMNA had an adjusted net loss of $14m in the fourth quarter 2006 (reported net income of $50m), versus an adjusted loss of $1.4bn in the same quarter 2005.
The calendar year improvement was realised despite a 207,000 unit reduction in GMNA production to balance inventory with deliveries, and reflects continued significant reductions in structural costs related to health care, manufacturing and workforce attrition, as well as positive sales mix and the impact of the company’s product and value focused sales and marketing strategy, the company said.
Global Insight’s Lindland said GM had nothing to apologise for in North America. “Toyota doesn’t make money in Japan,” she noted.
“They boosted sales 32% in China and almost every region had an increase in sales – 55% of sales are now from overseas.”
Lindland added that she saw GM’s domestic market sales of large SUVs as another big boost for the company last year.
“There was almost no decline in sales of full-size premium SUVs. These vehicles have a very high premium content and sell for high transaction prices.”
On the other side of the ledger, GM was also controlling its costs, Lindland said.
“They have attacked from two sides,” she said. “They have reduced their structural costs and they are producing and marketing higher quality, higher value vehicles.”
GM said it reduced structural costs in North America by $6.8bn in 2006, exceeding the $6bn target, and remains on-track to deliver the previously announced $9bn of annual structural cost savings in 2007(versus 2005 levels).
The automaker said progress in globalising its product development, powertrain and manufacturing operations, combined with aggressive GMNA turnaround actions, are driving these significant structural cost reductions and global automotive structural cost was reduced from over 34% of revenue in 2005 to 30% in 2006, a good first step towards the goal of cutting this to 25% by 2010.
General Motors Europe (GME) posted its first full year of profitability since 1999 with adjusted earnings of $227m for 2006 (reported net loss of $225m).
GME had an adjusted loss of $8m in the fourth quarter 2006 (reported net loss of $119m), compared to net income of $5m in the year-ago quarter. Revenue in the fourth quarter 2006 was $9bn, up from $8.1bn in the same quarter 2005. Contributing to GME’s improved performance during the year was strong revenue growth due to record volume of over 2m units, and continued structural cost reductions.
Wagoner said GM was especially pleased with progress in Russia, where sales grew 73% in 2006.
GM Asia Pacific (GMAP) delivered adjusted earnings of $441m in 2006 (reported net income of $1.2bn), compared with $557m in 2005, with the decline totally attributable to the loss of Suzuki equity income in 2006, as a result of the divestiture of most of GM’s holdings in the Japanese automaker.
For Q4 2006, GMAP’s adjusted earnings were $122m (reported net income of $135m) , consistent with the same quarter 2005 earnings of $124m.
Record 2006 sales of GM Daewoo products – many sold with Chevrolet or Holden branding – contributed to GM’s continued strong performance in the region, headlined by sales gains of 32% in China and 19% in Korea.
“The AP region remains the core of GM’s global growth strategy. In 2006, GM advanced its leading position in China, again improving its market share to almost 12%. We also announced plans to add a new assembly plant in India to take advantage of opportunities in that important market, and we continue to grow in Korea,” Wagoner said.
GM’s Latin America, Africa and the Middle East (LAAM) region delivered its best financial performance in 10 years with adjusted earnings of $533m in 2006 (reported net income of $490m), an improvement of $381m over 2005.
GMLAAM also recorded adjusted and reported fourth quarter earnings of $128m, up from adjusted earnings of $63m in the same quarter of 2005.
These improvements were driven by record revenue and volume for the region, and significant gains at GM do Brasil.
GMAC
On a standalone basis, GMAC Financial Services reported 2006 net income of $2.1bn, compared with net income of $2.3bn in 2005. GMAC’s operating earnings for 2006, excluding two significant items, amounted to $2.0bn, compared to $2.7bn of operating earnings in 2005.
For the fourth quarter of 2006, GMAC had net income of $1.0bn, up from $112m in the fourth quarter of 2005. The 2006 fourth quarter results include a $791m after-tax benefit related to deferred tax liabilities that GMAC transferred to GM when GMAC converted to a Limited Liability Company (LLC).
As a result of selling a 51% interest effective 1 December, GMAC results to the end of November were fully consolidated in GM’s, and December results were reflected on an equity income basis for GM’s remaining 49% interest.
GM reported an adjusted net loss of $284m associated with GMAC for the fourth quarter 2006, and net income of $1.5bn for the calendar year.
