GM Earned $4.7b, Beat "Financial Control" Issues In 2010
GM has announced its full-year results for 2010 [Highlights here, Chart set here, in PDF], and has achieved its first full-year profit since 2004 by pulling in $4.7b. Perhaps more significant than the numbers alone, however, is GM’s claim that it has whipped its “material weakness” in terms of financial reporting and internal controls, an issue that had haunted The General since being disclosed in the runup to its IPO. Still, GM’s earnings were well below the $5b+ full-year profit expected by analysts, and its half-billion Q4 profit was considerably more “pinched” than the $1b that Wall Street expected. More importantly, GM burned $1.7b in automotive operating cash (including a $4b pension contribution) and another $1.1b in CapEx in the fourth quarter, resulting in a $2.8b automotive free cash burn for the quarter. Over the course of 2010, GM’s cash pile has gone from $36.2b to $27.6b, although GM has access to over $5b in new credit facilities while cutting debt from $15.8b to $4.6b. Still, a weakly-profitable Q4 is better than last year’s $3.4b Q4 loss.
GM North America continues to be the key driver of GM’s revenue, generating the greatest earnings over the course of the year. GM Europe continues to be the greatest money-loser of GM’s divisions, dropping $1.8b on the year, as losses accelerated from $559 million in the third quarter to $586 million in Q4. Profits from GM’s international operations were consistent all year, rising from about $5b per quarter for the first three quarters to $6.1b in Q4 despite dropping two points of Chinese market share in Q4.
Strangely, GM’s only real market share increase from Q4 of 2009 to Q4 2010 came in the financially struggling European operations, while most other divisions held steady or shed small amounts of market share. As the graphic at the top of the post shows, GM’s incentives and market share mirror each other fairly directly, but the aggressive push into January 2011 does seem to have earned some market share… but we won’t know the financial cost of this “price war” salvo until Q1 results are released. Meanwhile, GM’s US fleet mix does appear to have decreased from from Q4 2009 to Q4 2010, from 25.8% to 22.3%. Still, for the full year, GM’s US fleet mix was 28.2%, a fact offset only by a relatively strong 89.5% capacity utilization.
More by Edward Niedermeyer
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To me the most telling facts are the never ending year over year loss in both Total north american market share and world market share and the almost ten billion in cash burn for the year. I would be worrying if I were them . This is just a continuation of business as usual before the bankruptcy. They may show a profit but I remember many years they reported profits as the health of the company continued to errode. A good CFO can put lipstick on any pig. Financial schenanagans were and continue to be the prime directive at Gimmick Motors
So GM reported that they earned $4.7b, that's great... Unfortunately, I have not seen anyone report on the debt service savings that GM realized through the 2010 calendar year by pulling the rug out from under their "trusted" business partners. I am left wondering how much of the $4.7b is simply savings from the previous "wrong" structure, as opposed to earnings from the current "right" structure. If I could wipe out all (or most) of my expenses, my bottom line at the end of the year would show a significant improvement too. Sadly, I maintain a moral obligation to any organization that has extended credit to me.