GM posts record profit in fourth quarter and 2015, but shares skid

Wed Feb 3, 2016 4:44pm EST
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By Bernie Woodall and Joseph White

DETROIT (Reuters) - General Motors Co (GM.N: Quote) reported record quarterly and annual profits on Wednesday and promised 2016 will be even better, but unimpressed investors dumped the automaker's shares.

The disconnect highlights the challenges facing GM, Ford (F.N: Quote) and Fiat Chrysler (FCHA.MI: Quote)(FCAU.N: Quote).

U.S. sales and profits are strong, the Chinese auto market has not fallen off a cliff, and European vehicle demand is recovering. Yet shares in the Detroit automakers are not getting any respect, increasing pressure on executives to boost dividends and share buybacks even as the costs of new technology and emissions regulations rise.

GM shares fell as much as 5 percent, even as Chief Executive Officer Mary Barra and Chief Financial Officer Chuck Stevens told investors on a conference call that any downturn in U.S. auto sales is still several years away. The automaker's shares closed Wednesday at $28.92, down 2.5 percent for the day and almost 13 percent for the year.

"The bears argue the U.S. auto industry has peaked and is ready to roll over," Stevens said on the call. GM is positioned to stay profitable even if U.S. car and truck sales fall to 10 million to 11 million vehicles from the current rate of over 17 million vehicles a year, he said.

Efraim Levy, an S&P Capital equity analyst, said while he did not agree, he understood the bears who fear U.S. auto sales will peak in 2016 and that "people are afraid that we're going to have a recession or some other drop-off in sales, and that that's going to hurt margins."

Levy sees any drop-off as limited and rated the stock a "strong buy."

Detroit automakers have a long record of losing money when the economy slumps. GM and the former Chrysler Group survived the last recession with the help of federally funded bankruptcies.   Continued...

General Motors Chairman and CEO Mary Barra speaks during a keynote address at the 2016 CES trade show in Las Vegas, Nevada January 6, 2016. REUTERS/Steve Marcus