GM Raises Profit Guidance for 2018--Update
January 11 2019 - 11:38AM
Dow Jones News
By Mike Colias
General Motors Co. said Friday it is increasing its full-year
profit guidance for 2018 and predicting even stronger performance
this year, with executives anticipating a restructuring in the U.S.
that includes plant closures and job cuts will lift earnings.
The company forecasts its earnings per share this year at $6.50
to $7.00, above the average analyst estimate of below $6. The
continued U.S. rollout of overhauled pickup-truck models -- the
company's most lucrative products -- should help it boost profits
in 2019, along with savings generated from its efforts to trim its
North American workforce.
GM's shares rose more than 8% in morning trading.
GM Chief Executive Mary Barra drew sharp criticism from
President Donald Trump and several members of Congress in November
when the nation's largest auto maker by sales announced an
operational restructuring plan for North America that is expected
to result in thousands of layoffs.
On Friday, GM said the move should add at least $2 billion to
GM's operating profit this year.
The Detroit-based auto maker said its profit could slip this
year in China, the world's largest auto market, where GM's sales
declined 25% in the fourth quarter. But Ms. Barra on Friday
downplayed fears of continued weakness in the Chinese car market in
2019, saying she is encouraged by recent trade talks between the
U.S. and China, and Beijing's signal it could roll out a potential
consumer stimulus.
"There are a lot of factors that will allow us to achieve
appropriate earnings this year" in China, she said.
For 2018, GM said its pretax earnings per share, adjusted for
one-time items, would exceed its previous estimate of $5.80 to
$6.20, set last summer. Robust sales of pickup trucks and
sport-utility vehicles helped drive results beyond the original
forecast, the company said. The company plans to announce
fourth-quarter and full-year results on Feb. 6.
Five years into her tenure, Ms. Barra has led the company to
record profits, in part by jettisoning slow-growing or unprofitable
business units, including GM's money-losing European division in a
2017 sale.
Now, she is focused on squeezing costs and improving cash flow
to sustain strong results if its key U.S. market cools, while still
funneling money toward future bets on electric and self-driving
vehicles.
GM's restructuring includes idling five factories in the U.S.
and Canada this year, part of a broader plan that could cut around
14,000 employees en route to slashing $6 billion in annual cash
costs by 2020. Ms. Barra has said she wants to proactively rein in
costs while the economy and company are in good shape.
GM said it would continue spending heavily on autonomous-vehicle
development this year, likely matching the roughly $1 billion it
was expected to spend in 2018. Executives reiterated plans to begin
a commercial robot-taxi service in an undisclosed U.S. city
sometime this year.
The auto maker also is doubling its spending on electric
vehicles in coming years, though it hasn't quantified the
investment. On Friday, GM said its luxury Cadillac brand would
serve as its "lead electric-vehicle brand" without detailing plans
for specific models.
Slowing growth in China has rattled U.S. companies and the stock
market, exacerbated by Apple Inc.'s revenue warning to start the
year, which the phone maker blamed largely on a slowdown in the
Chinese market.
GM posted strong results in China through the first three
quarters of 2018, despite a slowdown in the Chinese auto market
that hurt the bottom lines of some rivals. GM has said a bigger
proportion of its sales are SUVs and luxury Cadillac vehicles --
which carry higher profit margins -- and that it is strong in the
largest cities, where demand has held up better than in smaller
markets.
GM projected industrywide U.S. sales this year to come close to
the 17.3 million vehicles sold in 2018, a historically strong
number.
RBC Capital analyst Joe Spak said GM's 2019 profit outlook is
stronger than he expected, but said the company's bullish view
relies on continued strength in the world's two biggest car
markets, China and the U.S.
"We, and we believe the market, have taken a more conservative
approach to thinking about 2019," Mr. Spak wrote in a research
note.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
January 11, 2019 11:23 ET (16:23 GMT)
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