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GM posts 4Q net profit as comeback continues

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By TOM KRISHER, AP Auto Writer

      DETROIT (AP) - In an impressive comeback from bankruptcy, General Motors last year posted its first annual profit since 2004, putting the company on pace to repay more of the taxpayer bailout and even recapture the title of No. 1 global automaker this year.

      The company's net income was an impressive $4.7 billion in 2010, fueled by strong sales in China and the U.S. as the global auto market began to recover. Still, it now faces a challenging 2011 with an aging U.S. model lineup, rising gas prices that could cut into truck sales and a European unit that must be restructured to turn a profit.

      GM reported net income of $510 million in the fourth quarter, or 31 cents per share, its lowest quarterly profit of the year, but still far better than the $3.5 billion it lost in the same period in 2009.

      The profits included $400 million in charges mainly for paying preferred stock dividends and buying preferred stock from the U.S. government. Without the charges, the company earned 52 cents, exceeding Wall Street's expectations. Analysts polled by FactSet expected 49 cents per share.

      Revenue for the quarter was $36.9 billion. That also beat analysts' estimates of $34.3 billion.

      For the full year, GM earned $2.89 per share on revenue of $135.6 billion.

      It was the company's best performance since earning $6 billion in 1999 during the height of the pickup truck and sport utility vehicle sales boom.

      The full-year profit is impressive considering that from 2004 through 2009, GM was in a state of perpetual restructuring, trying to downsize its work force and shrink its factory capacity to match falling demand for its vehicles. The company lost more than $80 billion during the period and almost ran out of cash in 2008, when the government began a bailout that eventually reached $49.5 billion.

      With government financing, GM went into bankruptcy protection in June 2009, leaving a quick 40 days later cleansed of burdensome debt and labor costs. With lower costs and new models such as the Chevrolet Equinox - a small SUV that seats five - GM began its comeback.

      "Last year was one of foundation building," Chairman and CEO Dan Akerson said in a statement. "We demonstrated GM's ability to achieve sustainable profitability near the bottom of the U.S. industry cycle with four consecutive profitable quarters."

      Chief Financial Officer Chris Liddell said GM's bottom line also was helped by reductions in debt and pension liabilities following the bankruptcy process. The company also generated $6.6 billion in cash during the year despite paying $4 billion into its pension plans, he said.

      GM made less in the fourth quarter than it did during the three previous periods, mainly because of the charges and higher expenses from launching two new vehicles, the Chevrolet Cruze and Chevrolet Volt rechargeable electric car.

      But Citigroup Global Markets analyst Itay Michaeli said that doesn't raise concerns.

      GM had warned analysts that the fourth-quarter results could fall below three previous quarters because of higher costs to bring new models to market and increased vehicle engineering and development expenses. Such expenses are typical in the fourth quarter for automakers because that's generally when model years change and new vehicles are introduced.

      GM incurred higher costs to crank up factories to make the Cruze and Volt, both of which hit showrooms during the quarter. Marketing the cars also raised costs.

      Ford Motor Co. profits also sank in the fourth quarter for the same reasons, but the company didn't warn analysts well enough ahead of time. As a result, Ford missed analyst expectations and its stock price took a hit.

      Shares of GM rose 31 cents, or 0.9 percent, to $34.90 in premarket trading Thursday.

      GM exceeded Wall Street's expectations for the year. Analysts polled by FactSet expected the company would make $2.86 per share on revenue of $132.8 billion.

      Michaeli said 2011 will be a transition year for GM as its model lineup ages. In the U.S., sales generally wane as models grow older.

      The company, he said, had a market share of just over 20 percent in the last quarter of the year, and that rose to 21.8 percent in January as GM raised incentives such as rebates and low-interest loans. Michaeli said his surveys show that February should run above analysts' expectations of 18.5 percent, a sign that GM has enough momentum to carry it through the year with its current model lineup.

      "Hopefully they'll continue to run at a higher market share without having to use more incentives," he said.

      GM lost $4.4 billion in the second half of 2009, but began making money as auto sales started to recover last year, posting $4.2 billion in profits during the first nine months.

      It touted the profits to convince investors to buy stock in the revamped company. It then returned to the stock market in an initial public offering in November.

      In the fourth quarter of 2009, GM lost $3.5 billion on revenues of $32.3 billion.

             (Copyright 2011 by The Associated Press.  All Rights Reserved.)