General Motors 2014 profit falls 26 pct. to $2.8B, would have had big year without recalls

If it weren't for the recalls, 2014 would have been a stellar year for General Motors.

Even with $2.8 billion in pretax costs to fix more than 30 million recalled vehicles and $400 million set aside for death and injury claims, GM still managed to turn a $2.8 billion net profit.

That's because otherwise, most of the stars lined up well for the Detroit automaker. Gas prices dropped more than a buck to $2.26 per gallon. The U.S. economy gained steam. Cheap credit was abundant.

Combined, they sent buyers to GM's newly redesigned and lucrative pickup trucks and large SUVs in North America, the company's most profitable market. At the same time, chief competitor Ford's truck plants were down much of the year while it switched to a new pickup with a risky aluminum body. Sales in China grew faster than the market. Worldwide sales were up 2 percent to 9.9 million vehicles, a record.

Things were so good, GM decided to increase its dividend next quarter by 20 percent, to 36 cents, pending board approval.

Yes, there was trouble in Europe, Russia and Latin America, but by and large, GM had a good year.

GM's full-year earnings amounted to $1.65 per share. Net income was down 26 percent from the $3.8 billion the company made 2013. But excluding one-time items, GM made $3.05, beating Wall Street's expectation of $2.64, according to FactSet. Revenue rose slightly to $155.9 billion, beating the analysts' prediction of $150.6 billion.

In North America, GM's most profitable region, the company made $6.6 billion before taxes, 11 percent below 2013. That will bring record profit-sharing checks of about $9,000 for each of the company's 50,300 union factory workers later this month. To reward employees, GM backed out recall costs and measured the profit-sharing based on core earnings.

In the fourth quarter, GM reported net profit of $1.1 billion, or 66 cents per share. That's 21 percent better than a year ago. Excluding $300 million of negative one-time items, GM made $1.19, beating analysts' estimates of 83 cents per share.

The same factors that helped GM overcome the year of the recall remain present today, so the company needs to perform this year, Morgan Stanley analyst Adam Jonas wrote in a note to investors. "We may be looking at as close to an alignment of forces in GM's favor as we're going to see this decade," he wrote.

Still, there are uncertainties. Recall costs could mount as claims from those killed or injured in crashes caused by defective ignition switches grow. Sales in Europe and Russia could falter, and Japanese competitors will roll out attractive new products. And cheap leases and financing for six years or longer have likely pulled sales ahead from future months, according to Jonas. The pre-bankrutpcy GM would often beat analysts' forecasts during times when credit was easy, he wrote.

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