GM to Book Write-Down, But Outlook Is Brighter -- WSJ
January 17 2018 - 3:02AM
Dow Jones News
By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 17, 2018).
General Motors Co. will book a $7 billion write-down stemming
from the tax-overhaul bill passed last month, though executives
said broader benefits of the tax changes could help the company as
it aims to maintain profitability levels amid a slowdown in the
U.S. car market.
GM, which reports fourth-quarter results Feb. 6, said Tuesday
that 2017 pretax earnings are likely to be "at the high end" of its
previous forecast of $6 to $6.50 per share. In October, the
nation's largest auto maker said it expected to finish in the
middle of that range. Wall Street analysts expect earnings of $6.29
on average, according to FactSet.
GM said it expects similar results in 2018 amid continued
strength in its two biggest regions -- North America and China --
and a recovery in smaller markets including South America.
The company added that it expects "further earnings
acceleration" in 2019. Shares in GM rose 12 cents to $44.19 on the
New York Stock Exchange.
GM said it would take a $7 billion noncash write-down to reflect
the loss in value of tax-deferred assets held on its balance sheet.
GM said the value of those credits against future taxes declined
because of the reduction in the corporate tax rate to 21% from 35%.
Several companies in recent weeks have disclosed large write-downs
stemming from devalued tax-deferred assets.
GM finance chief Chuck Stevens said the noncash charge won't
affect the amount GM spends to pay taxes each year. He said the tax
overhaul will boost consumers' disposable income, helping to offset
any increases in the low interest rates that have aided car sales
for years.
Continued stout demand for pickup trucks and sport-utility
vehicles, which carry higher profit margins, has fueled the bulk of
GM's profit growth in recent years. The company's performance in
China, its largest market by sales, has remained resilient, with
sales outpacing the broader industry.
Some challenges in those parts of the business this year are
likely to be offset by a rebound in areas that had been trouble
spots, GM said in a presentation ahead of an investor conference.
It expects improvement in overseas markets including South America,
where GM has strong market share.
Among the obstacles, GM expects pricing pressure to weigh on
results in the U.S. and China this year. Production of its most
important products, full-size pickup trucks and SUVs, also will be
under pressure, GM said, as the changeover to an all-new truck
platform will lead to some factory downtime, cutting output by
about 70,000 trucks, or nearly 10%, compared with 2017.
GM executives said strong demand for a line of revamped
crossover wagons, a popular category, is likely to help offset the
lost production.
"We expect the headwinds and the tailwinds to roughly offset,"
Mr. Stevens, GM's finance chief, told reporters in Detroit, where
industry executives are gathered for the city's annual auto
show.
GM officials played down the threat of significant changes to
the North American Free Trade Agreement. During an investor
conference Tuesday, GM Chief Executive Mary Barra said she believes
there is an understanding among Trump administration officials that
significant changes to the pact could have "negative consequences"
on U.S. jobs, and that "Nafta needs to be modified, not that we
should walk away from it."
The company also said it is ramping up investment in
autonomous-vehicle development as it prepares for a driverless-car
service in undisclosed urban markets in 2019. GM said it would
spend on average about $250 million a quarter this year, up from
about the $150 million it had been spending in 2017.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
January 17, 2018 02:47 ET (07:47 GMT)
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