Detroit-based GM reported net income of $7.6 billion in 2011, bolstered by North American Ebit of $7.19 billion. Europe, meanwhile, continues to be a drain, losing $747 million for the year.
Europe has been a thorn in GM's side since well before the Great Recession. General Motors went into its government-assisted bankruptcy in 2009 intent on selling its European unit only to reverse course in November of that year when it decided to spend more than €3.3 billion (then $4.9 billion) to restructure the business.
Fresh deal chatter surfaced this summer, soon after GM chief executive Dan Akerson said he was growing "impatient" with Europe. But the company, which called the deal talk "speculative," until November had hoped Europe would break even in 2011.
The flip-flopping in part is causing the delays, angering workers and politicians and making it more difficult for GM to negotiate much-needed cost cuts and plant closures. Karl-Friedrich Stracke, head of GM Europe, said Thursday, Feb. 16, "we know that our overall performance is not where we need" and said talks continue with unions on a plan to restore the unit to profitability.
Europe is not just a GM problem. The market has been plagued by overcapacity and continuing economic uncertainty, some of the factors that led government advisers to recommend a sale of GM Europe in 2009.
But the company had sound logic in holding onto, and trying to fix, its European albatross. Despite its gains GM's margins in North America trail those of Hyundai Motor Co. and Ford Motor Co., and the company's results are raising some fears that it is becoming overly reliant on its domestic market. GM International, the unit that includes China sales, remains solidly profitable but reported a year-over-year decline in adjusted Ebit.
The good news for GM is that overall auto sales are expected to continue to increase in North America this year. However, with Asian rivals now mostly recovered from earthquake- and tsunami-related production halts, gains in the U.S. could be harder to come by this year.
Shares of GM traded up more than 7% on Thursday on the strong results, but at $26.84 it still sits well below its 2010 initial public offering price of $33. For GM to shoot higher, it might first have to get Europe out of the repair shop.
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