Here’s What Drove GM’s Profit Down in the Fourth Quarter

February 7, 2017, 4:23 PM UTC
A General Motors Co. Dealership Ahead Of Motor Vehicle Sales Figures
Photograph by Bloomberg via Getty Images

General Motors on Tuesday reported that fourth-quarter net income dropped partly from $500 million in foreign exchange losses, and the automaker forecast flat 2017 profit per share despite hefty stock buybacks.

The stock tumbled 4.7% in early trading in part because Wall Street fretted over GM’s higher U.S. inventories. Shares recovered slightly and are now down about 4.43%.

General Motors (GM) said profits were pressured in 2016 because it launched several car models at a time when consumers are turning away from cars to buy SUVs.

Inventories of unsold vehicles at its U.S. dealers rose by one-third to 845,000 vehicles at the end of 2016. GM Chief Financial Officer Chuck Stevens said the company had built up stocks ahead of product launches, and intends to bring inventories down through the year.

Its North American adjusted profit margins declined to 8.4% in the fourth quarter from 10% a year earlier. Adjusted profit margins for full-year 2016 were 10.1%, down from 10.3% in 2015.

Stevens said the company does not expect to break even in Europe this year, but will push to “get to that point in 2018.”

GM’s fourth-quarter net income fell to $1.8 billion, or $1.19 per share, from $6.3 billion, or $3.92 a share, a year earlier.

Excluding one-time items, GM earned $2.4 billion, or $1.28 a share, in the latest quarter, down 14 percent from a year earlier. The adjusted result beat analysts’ expectations of $1.17 per share.

GM forecast adjusted earnings per share for all of 2017 at $6.00 to $6.50 a share, compared with $6.12 for all of 2016.

Most of the currency impact was caused by the decline in the value of the British pound after Britain’s vote to leave the European Union, GM said.

Stevens said GM is assessing the ways in which proposals by U.S. President Donald Trump for a border tax on goods imported into the United States could affect the company.

“We support tax reform that would make the U.S. manufacturing base stronger. A border tax is one part,” he said. “There are a lot of moving pieces.”

GM’s 52,000 hourly U.S. workers represented by the United Auto Workers union will get an annual bonus of $12,000, up from $11,000 a year ago. This is based on GM’s North American adjusted profit.

GM completed a $5 billion share repurchase authorization in 2016, and in the fourth quarter began another $4 billion program that its board has authorized for buybacks.

GM said its diluted weighted average share count at the end of the fourth quarter was 1.57 billion shares, down nearly 70 million shares from a year earlier.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.