GM Posts ’84 Record Net of $4.5 Billion : But 4th Quarter Was Off 32.4%; Strikes in U.S., Canada Blamed
General Motors Corp., continuing to benefit from the boom in car sales brought on by stable fuel prices and the economic recovery, earned a record $4.5 billion in 1984, a 21.6% increase over its previous record of $3.7 billion posted in 1983, the company said Monday.
But GM added that strikes in the United States and Canada caused fourth-quarter earnings to drop 32.4% to $877 million from 1983’s record of nearly $1.3 billion.
Ironically, those strikes by GM’s unionized workers reduced the size of the profit-sharing bonuses that the company paid out to its employees, GM said. Each of GM’s 547,000 workers in the United States will receive an average of $515 as their share of GM’s 1984 profits, down from the previous year’s average of $606, the company said.
The United Auto Workers said in a statement that it was “disappointed” by the drop in profit-sharing caused by strikes against GM, but the union noted that its members will continue to “be militant when militancy is required, regardless of the manner in which they are compensated.”
Losses in European Market
The size of the company’s profit-sharing pool for U.S. workers, totaling $282 million this year, was determined by a formula based only on profits from GM’s U.S. operations.
Nearly $3.9 billion of its earnings came from the United States, GM said. The company was also profitable in Canada and Latin America but lost more than $291 million in the highly competitive European market.
GM said it lost a combined total of $450 million in potential worldwide profits in the second, third and fourth quarters of 1984 because of strikes in West Germany, Canada and the United States.
Wall Street analysts, who early in 1984 had forecast earnings of more than $5 billion for GM, were not surprised by the strike-related earnings decline at the end of the year.
Most had already reduced their forecasts to take into account the amount of car and truck production lost by GM because of the walkouts. “On the whole, it was still a very good year,” said David Healy, automotive analyst with Drexel Burnham Lambert, a New York investment firm. “You can’t quarrel with a record high in earnings.”
GM’s profits were buoyed by worldwide car and truck sales to dealers rising to 8.26 million units, up 6.3% from 1983’s 7.77 million units. Total dollar sales rose about 12.5% to $83.9 billion from 1983’s $74.6 billion.
Meanwhile, GM’s announcement of record earnings is likely to provide further ammunition to opponents of import quotas on Japanese cars, which are now scheduled to expire at the end of March.
With U.S. auto industry profits expected to total about $10 billion for 1984 (Ford Motor Co., Chrysler Corp. and American Motors Corp. all report their 1984 results later this month), pressure is mounting on the Reagan Administration not to extend the quota program for a fifth year. Critics argue that Detroit has already recovered financially from the recession, making further protection unnecessary.
Perhaps sensitive to such criticism, GM said that, although it could have paid out a record $304 million in executive bonuses for 1984, the company’s directors decided to plow back $35 million into company profits and to save another $45 million to be used for bonuses in future years.
Lavish executive bonuses in the auto industry sparked a firestorm of protest in Washington last year, when Reagan Administration officials threatened to oppose any extension of quotas if Detroit executives refused to show restraint in their compensation plans.
Although GM’s decision to hold down its bonus program could improve its relations with Washington, a company spokesman refused to say whether that was the reason for the board’s action.
GM’s dramatically improved sales have allowed GM to build up a huge cash cushion as insurance against a slump in car sales.
Meanwhile, a GM spokesman confirmed Monday that the auto maker is holding discussions with Minneapolis-based Norwest Corp. about acquiring Norwest’s mortgage banking subsidiary.
