GM posts higher-than-expected profit despite recall costs

General Motors Co yesterday posted fourth-quarter earnings far above analysts’ expectations as strong sales of high-margin SUVs and trucks in North America helped offset record recall costs there, and its shares rose 3%. Chief Financial Officer Chuck Stevens told reporters that profitability would improve in all geographic markets in 2015 and that the company was “very much on the path to 10% margins (in North America) in 2016.” North American profit margins for 2014 were 6.5%. Excluding the additional costs for a record vehicle recall, they would have been 8.9%, GM said. GM said it planned to raise its dividend by 20%, a move many shareholders have been pushing the company to do. Stevens told Reuters that further return of capital to investors could happen later this year, as soon as the company resolves legal issues involving the recall of a defective ignition switch linked to at least 51 deaths. Excluding special items, the largest US automaker earned $1.19 per share in the quarter, compared with the analysts’ average estimate of 83 cents, according to Thomson Reuters I/B/E/S. Net income rose to $1.1bn, or 66 cents a share, from $900mn, or 57 cents a share, a year earlier. Without the recall costs, 2014 operating profit of $6.5bn would have been $2.8bn higher and net income per share of $1.65 would have been $1.07 higher, GM said. Once again, North America accounted for almost all of quarterly earnings, which Stevens credited to increased sales of full-sized SUVs and pickup trucks. Profit on these larger vehicles dwarf those of smaller cars. Operating profit was $2.2bn for North America, compared with $2.4bn companywide. GM will pay annual bonuses of up to $9,000 to each of its US-based United Auto Workers union employees, up from $7,500 a year ago. The 2014 bonus is the highest ever given by the company. Fourth-quarter revenue fell to $39.6bn from $40.5bn and missed analysts’ estimates of $40.12bn.