DETROIT — General Motors Co. is likely to report full-year earnings of more than US$5 billion, its first annual profit in six years, although rising commodity prices and a drag from its European operations probably curbed the fourth-quarter performance. GM’s results, due on Thursday, come at a pivotal time for investor sentiment in the U.S. auto industry, still widely seen as being in the early stage of recovery from its near-collapse in 2008 and 2009.
Analysts have been encouraged by GM’s strength in China and its progress in slashing costs and debt in a bankruptcy funded by the Obama administration in 2009. But since GM’s record-setting US$23 billion initial public offering in November, investors have also become concerned about the pressure on profit margins from rising commodity prices, higher costs for launching new vehicles and the risk of a sustained spike in oil prices.
GM’s closest rival Ford Motor Co. reported a fourth-quarter profit last month that fell far short of expectations after a US$1 billion surge in costs from the third quarter.
The results sent both Ford and GM shares lower as investors worried about the risk that higher costs for everything from steel to plastic to the engineering teams behind new vehicles would erode profitability in future quarters. GM shares have fallen 11 percent in the four weeks since Ford’s results. Ford is down 21 percent in the same period.
GM management led by Chief Executive Dan Akerson had cautioned in a January meeting with analysts that fourth-quarter earnings would be below the rate for the first three quarters of the year.
“Ford has obviously taken a lot of wind out of the upside speculation of GM,” said Josef Schuster, founder of IPOX Schuster LLC and a fund manager specializing in IPOs.
Analysts polled by Thomson Reuters I/B/E/S on average forecast fourth-quarter profit for GM of about US$966 million and a full-year 2010 profit of about US$5.3 billion.
Fourth-quarter revenue is expected to be nearly US$33 billion with earnings of 46 cents per share, according to the average forecasts.
From 2005 to 2009, GM had lost about US$88 billion in its slide to bankruptcy. In the decade prior to then, annual U.S. auto sales averaged almost 17 million vehicles. The total plunged to a low of 10.4 million in 2009, the year that GM was overtaken by Toyota Motor Corp. as the global top seller.
GM sells more than 70 percent of its vehicles outside its home market, led by China. GM now sells more vehicles in China than in the United States.