(Image Source: Newport Business)
BY JIM FLINK
ANCHOR LAUREN GORES
When do record North American profits become horrendous news? When European sales cut heavily into the winnings on this side of the pond. General Motors announced some hefty good news — and bad news — for the fourth quarter of 2011. First the good — courtesy the Wall Street Journal....
“$7.6 Billion dollar profit, that’s huge for this company. Remember, they along with Chrysler went into bankruptcy in 2009, got bailed out by the U.S. government, had to rebuild themselves...”
And rebuild they did. Closing dealerships. Cutting jobs. Forcing concessions with unions. Record North American profits are the good news. Then there’s the bad. GM lost more than $600 million dollars — in the fourth quarter — in Europe alone. Forbes explains just how bad that is.
“If you consider that GM sold fewer than half a million cars in Europe during the fourth quarter, GM’s loss works out to about $1,400 per vehicle … No wonder someone at GM warned the results would be horrendous earlier this month. And things have deteriorated there fast: until November, GM was still saying Europe would break even in 2011.”
So this is a tale of two companies. CNBC’s Phil LeBeau puts it into perspective.
“It’s all about the two worlds of GM. In North America, making $1.5 billion, in international operations, primarily China, making another 400 million. But Europe and South America? Those are the problems for GM.”
GM calls its European operations — challenging. Its CFO tells Bloomberg what it plans to do to fix the challenges.
“People like to focus on capacity and things like that. It’s about having the right vehicle portfolio on the road, we feel very good about the product portfolio we have right now in Europe, so it’s a revenue equation as well as a cost equation.”
But there are obstacles to a quick fix when it comes to costs in Europe. The Associated Press notes, GM’s Opel line, which is made in Germany, presents a problem, because plant closures aren’t permitted through 2014 per labor contracts.
