10:20 PM
By Bernie Woodall and Deepa Seetharaman
DETROIT | Thu Feb 24, 2011 12:51am EST
DETROIT (Reuters) - Back from the brink with the help of U.S. taxpayers, General Motors Co is expected to report its first annual profit since 2004 with fourth-quarter earnings curbed by rising commodity costs and the drag from its European operations.
GM's results, due on Thursday, come at a pivotal time for investor sentiment in the U.S. auto industry, still widely seen as being in the early stage of recovery from its near-collapse in 2008 and 2009.
Analysts have been encouraged by GM's strength in China and its progress in slashing costs and debt in a bankruptcy funded by the Obama administration in 2009.
But since GM's record-setting $23 billion initial public offering in November, investors have also become concerned about the pressure on profit margins from rising commodity prices, higher costs for launching new vehicles and the risk of a sustained spike in oil prices.
GM's closest rival Ford Motor Co reported a fourth-quarter profit last month that fell far short of expectations after a $1 billion surge in costs from the third quarter.
The results sent both Ford and GM shares lower as investors worried about the risk that higher costs for everything from steel to plastic to the engineering teams behind new vehicles would erode profitability in future quarters.
GM shares have fallen 11 percent in the four weeks since Ford's results. Ford is down 21 percent in the same period.
GM management led by Chief Executive Dan Akerson had cautioned in a January meeting with analysts that fourth-quarter earnings would be below the rate for the first three quarters of the year.
"Ford has obviously taken a lot of wind out of the upside speculation of GM," said Josef Schuster, founder of IPOX Schuster LLC and a fund manager specializing in IPOs.
"If Ford is not meeting the earnings (expectations), it's hard to imagine that GM would strongly outperform," said Schuster, whose funds hold GM shares.
Analysts polled by Thomson Reuters I/B/E/S on average forecast fourth-quarter profit for GM of about $966 million and a full-year 2010 profit of about $5.3 billion.
Fourth-quarter revenue is expected to be nearly $33 billion with earnings of 46 cents per share, according to the average forecasts.
From 2005 to 2009, GM had lost about $88 billion in its slide to bankruptcy.
In the decade prior to then, annual U.S. auto sales averaged almost 17 million vehicles. The total plunged to a low of 10.4 million in 2009, the year that GM was overtaken by Toyota Motor Corp as the global top seller.
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