General Motors Co reported record quarterly and annual profits on Wednesday and promised 2016 will be even better, but unimpressed investors dumped the automaker's shares.
The disconnect highlights the challenges facing GM, Ford and Fiat Chrysler.
U.S. sales and profits are strong, the Chinese auto market has not fallen off a cliff, and European vehicle demand is recovering. Yet shares in the Detroit automakers aren't getting any respect, increasing pressure on executives to boost dividends and share buybacks even as the costs of new technology and emissions regulations rise.
GM shares fell as much as 5 percent, even as Chief Executive Officer Mary Barra and Chief Financial Officer Chuck Stevens told investors on a conference call that any downturn in U.S. auto sales is still several years away.
"The bears argue the U.S. auto industry has peaked and is ready to roll over," Stevens said on the call. GM is positioned to stay profitable even if U.S. car and truck sales fall to 10 million to 11 million vehicles from the current rate of over 17 million vehicles a year, he said.
Efraim Levy, an S&P Capital equity analyst, said while he did not agree, he understood the bears who fear U.S. auto sales will peak in 2016 and that "people are afraid that we're going to have a recession or some other drop-off in sales, and that that's going to hurt margins."
Levy sees any drop-off as limited and rated the stock a "strong buy."
Detroit automakers have a long record of losing money when the economy slumps. GM and the former Chrysler Group survived the last recession with the help of federally funded bankruptcies.
Barra and Stevens said GM is a different company now. The automaker expects to cut operating costs by $5.5 billion by 2018, and return $16 billion to shareholders in dividends and share buybacks over that span.
At the same time, GM is investing to fend off challenges from would-be disruptors. Barra outlined how GM plans to use its recently acquired stake in ride hailing service Lyft to pave the way for the introduction of self-driving vehicles.
"We will continue to invest in game changers," Barra said.
GM earlier Wednesday reported record net income of $9.7 billion for 2015. Profit before interest, taxes and one-time items was $2.8 billion, a fourth-quarter record and ahead of analysts' expectations.
GM affirmed a forecast to increase 2016 earnings per share, excluding one-time items, to $5.25 to $5.75 from $5.02 a share in 2015.
GM generated nearly all of its fourth-quarter profits in North America.
Shares dropped 3.2 percent to $28.69 after falling as low as $28.18.
Reporting by Joe White and Bernie Woodall in Detroit; Editing by Jeffrey Benkoe.