GM General Motors Company

By Gautham Nagesh and Christina Rogers 

General Motors Co.'s fourth-quarter profit surged amid growth in China and booming U.S. sales of pickup trucks and sport-utility vehicles, capping a record year for the nation's largest auto maker.

GM reported $6.3 billion in net income in the final three months of 2015, up from $1.1 billion a year earlier. The latest quarter included a $3.9 billion noncash gain from the revaluation of tax assets in Europe. The Detroit auto maker's full-year profit for 2015 more than tripled to a record $9.7 billion, up from $2.8 billion a year earlier.

But investors aren't finding a lot to cheer about even though GM's results beat expectations. Wall Street remains trained on turbulence in China and concerns U.S. auto sales have peaked. GM's stock is down some 20% over the past 52 weeks and trades well below the company's 2010 $33-a-share initial public offering price. GM shares were off roughly 4% at about $28.47 in New York Stock Exchange trading midday Wednesday.

There are emerging red flags on GM's home turf, where gasoline prices falling below $2 a gallon, low interest rates and employment gains fueled record auto sales in 2015. GM's U.S. sales in January were flat amid mixed results from other car makers. Industrywide inventories and discounts are rising.

Gyrating markets have some on Wall Street bracing for an economic slowdown and questioning whether GM and other car companies can keep the good times rolling. Business for car companies and their suppliers tends to be cyclical and the financial crisis pushed many, including GM, to the financial brink in 2008 and 2009.

"We believe investors should pay closer attention to deteriorating [transaction price] trends, which we expect to accelerate," said Joseph Amaturo, a Buckingham Research Group analyst, in a note.

GM executives and some analysts contend Wall Street is ignoring fundamental improvements in the U.S. economy and auto industry. They argue U.S. car sales have plateaued, rather than peaked, and predict additional growth.

"We know there's a lot of concern from the capital markets on this, but we don't subscribe to that view," said GM Chief Financial Officer Chuck Stevens. "We believe we are well positioned for a downturn, we just don't think it's going to happen any time soon."

The results also suggest GM has so far weathered the worst of a safety crisis that emerged when Chief Executive Mary Barra took the helm in early 2014. GM has already settled criminal charges, litigation and a regulatory probe linked to a defective ignition switch on millions of recalled vehicles for more than $2 billion overall.

GM is now benefiting from friendly economic conditions driving consumers to showrooms and investors' concerns are centered on the company's room for growth. GM executives said in 2016 they planned to deliver on expectations and increase profits, including breaking even in Europe for the first time in years.

GM pared losses in Europe in 2015 to $813 million from $1.4 billion in 2014. GM doesn't plan any further restructuring actions because the company has "the right cost structure now " after removing the Chevrolet brand from the region and leaving Russia altogether, Mr. Stevens said.

"Breaking even in Europe in 2016 is a companywide focus and we're confident that we're going to achieve that," Mr. Stevens said.

Crosstown rival Ford Motor Co. turned a profit in Europe last year after losing more than $3 billion between 2012 and 2014 and on Wednesday said it would aim to cut hundreds of jobs and kill models in an effort to keep earnings growing.

GM's overall fourth-quarter revenue was flat compared with a year ago at $39.6 billion.

GM earlier this year invested $500 million in ride-sharing startup Lyft Inc. and purchased assets from its defunct rival Sidecar Technologies Inc., with the eventual goal of developing a driverless-car hailing service. The alliance can create "an autonomous fleet of sharing vehicles for use quicker than anybody else," Ms. Barra said.

Equity income from GM's Chinese joint venture during the fourth quarter was $572 million, up from $511 million a year ago. GM cited stronger margins in the world's largest auto market, and retail sales up more than 14% in the fourth quarter from a year earlier.

Mr. Stevens pointed to the need to get better margins on small cars as cheap gasoline spurs sales of trucks and SUVs. Mr. Stevens said he wouldn't rule out GM pursuing partners to make small cars but said the auto maker is confident it can improve returns alone for now. Fiat Chrysler Automobiles NV Chief Executive Sergio Marchionne recently said the Italian-U. S. auto maker would stop making small and midsize cars but said the company would explore joining with others to build them.

GM's total revenue for 2015 was $152.4 billion, down from $155.9 billion in 2014. GM said the revenue decline was primarily due to a foreign currency exchange impact of $9.3 billion.

GM reaffirmed its recent guidance for 2016 that adjusted earnings per share would be between $5.25 and $5.75. GM's eligible U.S. hourly workers will receive profit-sharing checks of $11,000 on February 26, the company said.

Write to Gautham Nagesh at gautham.nagesh@wsj.com and Christina Rogers at christina.rogers@wsj.com

(END) Dow Jones Newswires

February 03, 2016 14:34 ET (19:34 GMT)

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