GM Posts Loss on Tax Changes, Logs Strong Demand for Pickups and SUVs--Update
February 06 2018 - 9:20AM
Dow Jones News
By Mike Colias
General Motors Co. said its fourth-quarter bottom line swung to
a $5.2 billion loss because of a hefty charge related to U.S. tax
reforms, but stout demand for pickup trucks and SUVs pushed
operating profit to a record for the quarter, surpassing Wall
Street forecasts.
GM's net loss for the final three months of 2017 included a $7.3
billion noncash write-down to reflect the loss in value of deferred
tax assets held on its balance sheet. Several large companies have
reported sizable write-downs in the value of those credits against
future taxes, which fell because of the lower corporate tax rate
under federal tax overhaul.
The largest U.S. auto maker in terms of sales said
fourth-quarter operating profit excluding one-time factors rose 19%
to $3.1 billion, or $1.65 per share, easily hurdling the $1.38
average analysts' estimate.
Revenue slipped 5.5% to $37.7 billion, higher than the average
analyst forecast of $36.5 billion, bolstered by strong sales of
sport utilities in North America.
For the year, GM earned $12.8 billion in operating profit,
matching last year's record. That amounted to $6.62 per share,
above the $6-$6.50 range GM had forecast.
GM shares slipped less than 1% in premarket trading after
falling more than 3% Monday amid the broader stock-market
plunge.
GM finance chief Chuck Stevens said the auto maker's optimistic
outlook for 2018 hasn't changed despite mounting concerns over
inflation that have touched off the recent global selloff in
equities.
"We are not overly concerned at this point around some of the
discussion around inflation," Mr. Stevens told reporters Tuesday.
He said underlying economic conditions in the U.S. -- including
historically low interest rates, wage growth and benefits from tax
reform -- should support the economy and vehicle sales this
year.
Results in China, GM's largest market in terms of sales volume,
remained strong as the company offset industrywide price pressure
with higher sales of pricier vehicles, including Cadillacs and
SUVs. Income from GM's joint ventures in China totaled $504 million
in the fourth quarter, down 4% from a year earlier.
GM's finance arm, GM Financial, contributed $301 million in
fourth-quarter operating profit, up 85% from a year earlier. For
the year it brought in $1.2 billion, the most since GM
re-established a captive finance unit following its 2009
bankruptcy.
The company swung to a net loss for the year of $3.9 billion on
the tax-related charge and other one-time expenses related to the
August sale of its European business to French car maker Peugeot
.
GM is benefiting from heightened demand for sport utilities and
pickup trucks, which generally reap bigger profits than passenger
cars. The trend is especially helping GM, Ford Motor Co. and
Fiat-Chrysler Automobiles NV, which sell broader portfolios of
trucks and SUVs than Asian rivals.
The richer product mix is a big factor allowing GM to sustain
high profit margins even as sales in the key U.S. market edge down
after a seven-year growth spurt. Fourth-quarter North American
operating profit rose 7%, to $2.9 billion, even as production slid
about 15%, according to an estimate from WardsAuto.com.
Under terms of its United Auto Workers contract, GM said it
would cut profit-sharing checks later this month of up to $11,750
to about 50,000 U.S. factory workers, based on the operating profit
in North America.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
February 06, 2018 09:05 ET (14:05 GMT)
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