Now the question is whether its U.S. operations can keep making enough to carry the company and cover widening losses in Europe.
General Motors Co. on Thursday posted a profit of $4.9 billion for 2012, down 36 per cent from a year earlier, when it made $7.6 billion. Its net income fell because of European losses and a truckload of one-time accounting gains and losses in both years. Last year's pretax profit, which excludes the one-time items, still dropped, but only by 5 per cent to $7.9 billion. Revenue for the year rose 1 per cent to $152.3 billion.
The company's money machine, North America, made $6.9 billion before taxes for the year. But GM lost almost $1.8 billion in Europe, where it has too many factories and workers as sales slow in a faltering economy.
The European losses widened by more than $1 billion. They also wiped out the combined $1 billion made by GM's auto loan and South American businesses, plus part of the $2.2 billion made by International Operations including China. GM expects the European market to weaken further this year, which could further stress its bottom line.
Just about every automaker is seeing sales fall and losses mount in Europe as the economy there continues to unravel. And GM's use of U.S. profits to cover the losses isn't unique. Its chief rival, Ford Motor Co. posted a record North American pretax profit of $8.3 billion last year, but it lost $1.75 billion in Europe.
Still, GM executives are optimistic that cost-cutting and 23 new vehicles by 2016 will help Europe break even before taxes by the middle of this decade. They predicted some improvement in GM's Europe performance this year, and they said new pickup trucks, two new Cadillacs and other new models will keep profits rolling in the U.S.
"The GM launching these products is undeniably a stronger company than it was even a year ago," CEO Dan Akerson said.
The optimism is showing up on GM's income statement. In the fourth quarter, the company returned roughly $35 billion in U.S. and Canadian tax credits to its books. Under accounting rules, GM must book the credits because it's likely to use them to offset income taxes. The gain, though, was largely offset by removal of goodwill and the devaluation of assets in Europe because the prospects aren't so good.
Chief Financial Officer Dan Ammann said restoring the tax credits is good news for GM because it's a sign that profits will continue. GM has made $13.4 billion since the start of 2010, shortly after it left bankruptcy protection.
"We've established a clear track record of profitability over the last three years," Ammann said. "It's a reflection of our confidence in the fact that we're going to generate significant profitability in the North American market going forward."
The accounting change means that GM will return to a 35 per cent tax rate, up from the mid-teens last year. It still won't pay U.S. federal income taxes for many years due to the write-offs. Tax payments in cash will remain at a 10 per cent rate for the global company.
GM shares closed down 92 cents, or 3.2 per cent, at $27.75.
The earnings in North America also mean big bucks for GM's 50,000 U.S. factory workers, who agreed to take profit sharing over pay raises in 2011 contract talks. The workers represented by the United Auto Workers union will get $6,750 each, down a little from $7,000 last year.
Record sales in China also helped GM in 2012, and GM said that should continue this year. The company gained a point of market share in China last year, and in January, sales topped 300,000 vehicles in a single month for the first time.
Despite the big profits in North America, GM is showing signs of weakness there. Its North American pretax profit fell 3.3 per cent from 2011, but Ammann said it would have gone up if not for an $800 million drop in pension income. Also, GM's share of the U.S. market dropped almost two percentage points from 2011, to 17.5 per cent. And its sales aren't keeping up with the industry's growth. Last year, total U.S. auto sales rose 13 per cent, but GM's went up only 4 per cent.
Akerson has said he expects GM to post a modest market share gain this year with total U.S. sales expected to rise from 14.5 million in 2012 to more than 15 million. At more than 15 million, the sales are almost back to what analysts consider normal levels, but they're still far short of the recent peak of almost 17 million in 2005.
Because of the losses in Europe, neither GM nor Ford can afford problems in North America, said James Albertine, an auto industry analyst for Stifel Research. "The story for North America essentially has to be airtight," he said.
But he predicts that GM will have an impressive year because of the new vehicles that are coming out, particularly the new pickup trucks, the Chevrolet Silverado and GMC Sierra. The Silverado is GM's top-selling vehicle, and the new version will arrive in the middle of a year in which pickup sales are expected to rise.
"Some of their key products are going to have a lot of momentum," Albertine said. "Overall I think they'll do a good job holding the progress that they've made to date."