Wednesday, February 23, 2011

General Motors Co. (NYSE: GM): Q1 Earnings Preview

General Motors Co. (NYSE: GM) is scheduled to release its first-quarter financial results before the market open on Thursday, February 24, 2011. Analysts, on average, expect the company to report earnings of 46 cents per share on revenue of $34.11 billion. During the first three quarters of 2010, GM posted a combined net profit of $4.2 billion.

General Motors Company (GM) is a global automotive company. The company develops, produces and markets cars, trucks and parts worldwide. Its business is diversified across products and geographic markets.

GM has sought to keep expectations low for the quarter, which ended in December, after earning $4.2 billion in the first nine months of the year. It has warned that fourth-quarter results will be "significantly lower" than those recorded in previous quarters. The automaker has cited costs related to the introduction of new models, including the compact Chevrolet Cruze and Volt plug-in hybrid as well as increased engineering expenses, for the anticipated lower earnings. GM also expects to take a $700 million charge to buy back preferred shares held by the U.S. Treasury. The company said it expects to record positive earnings before charges related to interest and taxes, but it didn't say if it anticipates a net profit in the fourth quarter. Wall Street expects GM to report earnings of 47 cents a share on revenue of $34 billion.

The company is expected to report its first annual profit since 2004, capping a year in which it restructured North American sales and marketing, launched its Chevy Volt extended-range electric car and held the largest initial public offering in history.. GM had $82 billion in losses from 2005 to 2008 before tumbling into bankruptcy in 2009. After filing for Chapter 11 bankruptcy protection on June 1, 2009, GM received $50 billion federal aid to emerge from bankruptcy. In its efforts to repay a major portion of the government bailout money, GM successfully launched a $23.1 billion Initial Public Offering of stock as per its reorganization plan. While the U.S. still retains a large share in GM, the automaker says it is on its way to being fully public after its IPO late last year. The Treasury department is hoping to divest its remaining shares of GM stock over the next two years. After GM’s IPO, the government divested most of its stake, trimming it down to 26.5%, from 61%, raising $23.1 billion.

GM is ramping up product development spending to $7 billion annually, from $5 billion in 2009, when GM went bankrupt. The automaker plans to keep that level constant, despite fluctuations in global auto sales. Chief Executive Officer Dan Akerson is demanding speedier introductions of new models as the automaker revamps a lineup that is older than rivals such as Ford Motor Co. GM’s spending on cars including the Chevrolet Volt plug-in hybrid and future products may lead to higher costs similar to those that restrained profits at Ford and Daimler AG.

CFO Chris Liddell has said that GM will be able to make $11 billion to $13 billion before interest and taxes in a moderate sales year, and $17 billion to $19 billion when sales are at their peak. 

Last month, GM. reported a 12.2% rise in vehicle deliveries for the calendar year 2010 to 8.39 million vehicles, reflecting strong growth mainly in China. GM is betting big on sales from the rest of the globe. The company achieved double-digit increases in four of its top 10 markets, while sales reduced in three markets. In China, GM delivered 2.35 million vehicles, 28.2% higher than the previous year. GM and its Chinese partners were the first to top the 2 million sales mark in a single year. The growth was 6.3% in the United States, GM's No. 2 market, to 2.22 million vehicles, despite the phase-out or sale of four brands. Brazil, GM's third-largest market, saw deliveries rise by 10.4%, and in Uzbekistan, which is now GM's tenth-largest market by volume, sales climbed 41.3%. Recently, automakers said that it will continue investing aggressively in China to ensure the long-term success of the company."As our largest market, China played a significant role in GM's success in 2010." General Motors' Chairman and Chief Executive Officer Dan Akerson said during a media briefing today in Beijing. He added that the company will continue to make China one of its priorities. Akerson further said the company plans to introduce more than 20 new and upgraded models over the next two years, strengthen its local product development capability and expand cooperation and sharing of technology with local partners.

Last month, the company said that it will withdraw its $14.4 billion application for direct loans from the U.S. Department of Energy citing improvement in global business performance. Chris Liddell, GM vice chairman and chief financial officer, said, "This decision is based on our confidence in GM's overall progress and strong, global business performance." "Withdrawing our DOE loan application is consistent with our goal to carry minimal debt on our balance sheet," Liddell added.The Detroit, Michigan-based company submitted an application with the Energy Department (DOE) in October 2009 under the Advanced Technology Vehicles Manufacturing Loan Program. The loan program, which comes under section 136 of the Energy Independence and Security Act passed in December 2007, provides up to $25 billion in direct DOE loans to retool factories for making fuel efficient vehicles and components.

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