GM Earnings Preview: Record Annual Profit, but Losses in Europe

General Motors (GM) is expected to report lower fourth-quarter earnings per share as the struggling European operations of the top U.S. automaker offset strong domestic sales.

Detroit-based GM, which announces results Thursday before U.S. markets open, is expected to report fourth-quarter income before interest and taxes of $1.18 billion, or earnings per share of 44 cents, down from $1.35 billion, or 52 cents a share, according to a Reuters survey of analysts. Fourth-quarter revenue is expected to be $37.8 billion compared with $36.9 billion in the year-earlier quarter.

Analysts said the fourth-quarter decline stems from poor results in Europe and especially at the company's Opel unit, which has been battered by economic turmoil. For GM, that means an expected fourth-quarter loss of more than $300 million, according to Reuters. In the third quarter GM lost $292 million in Europe.

It's a mess, said Michelle Krebs, a senior analyst at Edmunds.com. GM's back is against the wall on Opel. It just is going to have to do something there. So I think we will see something coming in that regard.

GM is reportedly looking for deep concessions from labor unions in Europe, particularly in Germany. The Opel unit has suffered from nearly $14 billion in losses since 1999, and GM is considering options such as severe job cuts and plant shutdowns.

They're very concerned about it, Krebs said. The whole European situation. The (euro zone) debt crisis is lowering car sales from last year to this year. Opel has always been a problem for GM. And there's a huge problem in Europe overall with the total industry. There's too much factory capacity for the demand. It's a very mature market. The market's not going to grow, and yet they've got all this capacity.

GM has taken action to respond to that market, closing some operations in Belgium. That, Krebs said, has not been enough. And indeed, General Motors is not the only automaker struggling to take on the European crisis. GM rival Ford Motor Co. recently posted losses of nearly $200 million in its fourth quarter there, which was almost four times an increase from the third quarter.

No decisions have been made on the possibility of drastic cuts of plant closures, but the main concern lingering at GM is how to restore Opel to profitability.

No one has blinked and closed factories because it's such a hot, political issue, Krebs said. More so than even here.

GM's European problems contrast with big success in the U.S., where the company increased sales in the fourth quarter by 4.4 percent.

For all of 2011, analysts expect GM to report net income before interest and taxes climbing to a record $8 billion compared with $7.5 billion in 2010. Earnings per share are anticipated to be $4.02 compared with $2.89 in 2010. Revenue is anticipated to be $149 billion compared with the previous year's $135.6 billion.

According to data from Edmunds, U.S. sales were up 13.2 percent in 2011. GM's market share increased 0.5 percent, and the automaker cut incentives by 6.4 percent.

GM had a good year in the U.S., Krebs said. Lower incentives, improved sales volume, increased market share, those are all a winning formula.

GM shares fell 3 cents to $25.31 in afternoon trading.