GM CEO Tells CNBC Automaker 'Moving In Right Direction'
With General Motors posting its first quarterly profit in more than two years, Chief Executive Rick Wagoner said the company's momentum is heading in the the right direction and things could improve further later this year.
"I think this is another quarter where we see the momentum moving in the right direction," Wagoner said, in an interview on CNBC.
Despite lower levels of auto production in the fourth quarter, the world's biggest automaker was able to swing to a profit, helped by a cost savings realized from a sweeping restructuring and strength outside the U.S. auto market.
Wagoner expects the U.S. economy to pick-up as the year progesses, as the housing market stabilizes. This, in turn, will help the U.S. auto market, he said.
"I would have to say as we see the auto market right now it's really been pretty 'so-so' in January and February, and March is off to a similar - let me say - mediocre, start," Wagoner said.
In the fourth quarter, GM earned $950 million, or $1.68 a share, compared with a loss of $6.6 billion, or $11.63 a share a year ago.
The fourth-quarter results included $770 million in special items attributed to the sale of a 51%stake in GM's financial arm, General Motors Acceptance Corp. But the Detroit company said it would have made $180 million in the quarter without the GMAC sale proceeds.
Excluding one-time item, GM earned $180 million, or 32 cents a share, in the latest quarter.
Revenue fell slightly in the latest period to $51.2 billion from $51.7 million a year ago. Sales were hurt by the sale of the GMAC unit.
Analysts, on average, had expected the company to earn $1.19 a share on revenue of $51.2 billion, according to Thomson Financial.
GM, which had delayed its results from January, also restated net earnings going back to 2002, as it had said it would do because of accounting errors.
GM said it cut its recurring costs by $6.8 billion in 2006, about $800 million more than it had initially planned. Those savings came mostly through job cuts in its manufacturing operations, but also through some reduced spending in engineering and marketing.
GM remains on track to cut those structural costs by $9 billion this year compared with 2005, before it began a sweeping restructuring.
GM's operating cash flow, which Wall Street analysts have tracked as an indicator of the durability of its turnaround, will be negative in 2007, Chief Financial Officer Fritz Henderson told reporters this morning.
"Everyone knew 2006 had to be a big year and it was," he said. "But I would say that no one at GM is declaring victory."
GM said it lost $10.4 billion in 2005 after restating net income for the year. That loss prompted a restructuring that includes slashing more than 34,000 jobs and closing 12 plants. In 2006, GM ended up losing $2 billion.
On Tuesday, GM reported that GMAC, its former financing arm, would receive another $1 billion from GM.
GMAC has been hurt by the weakening market for U.S. mortgages, and the $1 billion payment would be used to help shore up the company's balance sheet. The payment was provided for under the terms of the unit's sale to a group led by Cerberus Capital Management.
GMAC is tightening its underwriting standards for mortgages to borrowers with weaker credit and taking more aggressive steps to address delinquent loans. GMAC's actions come as the mortgage market sees an increase in late payments, particularly among subprime borrowers, which are typically the riskiest borrowers.