GM bucks gloomy earnings forecast trend, shares jump

NEW YORK: General Motors Co executives on Friday bucked gloomy forecasts for growth and sent the automaker’s shares soaring, promising investors stronger 2019 earnings and outlining ambitious plans for its Cadillac brand to challenge Tesla Inc in the growing electric vehicle market.
GM said that despite forecasts of decline in US and China passenger car sales, the company expects 2018 profit to exceed Wall Street expectations, and promised higher earnings per share in 2019. Chief Executive Mary Barra, in her presentation to investors on Friday, stood her ground on cost-cutting actions that have provoked threats of retribution from US President Donald Trump and outrage from unions and elected officials in the affected states.
“Because of the actions we have been taking for several years, General Motors enters 2019 leaner, more agile and positioned to win,” Barra told investors at the New York presentation.
The market cheered GM’s forecast, sending the company’s stock up nearly 8 per cent.
“We’re very much looking forward to the execution of what they’ve announced,” said Tim Piechowski, portfolio manager with ACR Alpine Capital Research, which owns GM shares. Piechowski said GM’s core business, its stake in ride services company Lyft and its Cruise self-driving car unit are together worth more than the company’s recent share price indicates.
Barra also said proposals from Ohio officials that GM sell its Lordstown, Ohio, small car factory to Tesla are “moot” because Tesla is “not interested in our GM workforce represented by the UAW,” the United Auto Workers union.
As Barra spoke with investors in New York, hundreds of GM workers demonstrated in Windsor, Ontario, across the Detroit River from GM headquarters, protesting the company’s plan to shut its Oshawa, Ontario, vehicle assembly plant. The UAW is suing GM in connection with US plant shutdown plans, and on Friday called on GM to build its new electric vehicles in the United States.
GM’s bullish outlook coincided with new cost-slashing actions by rival Ford Motor Co (F.N), which on Thursday outlined plans to cut thousands of jobs in its European operations and kill an experiment in providing van rides. Ford executives are scheduled to meet with investors next week on the sidelines of the Detroit auto show.
Barra and her lieutenants have spent the last two years pushing a strategy to exit unprofitable markets in Europe and developing markets, restructuring money-losing operations in South Korea, and killing unprofitable car lines in North America. In November it put five North American factories, including four in the United States, on notice for closure, and cut almost 15,000 jobs.
“We are no longer investing in things that don’t make money,” GM President Mark Reuss told investors on Friday. “The future is coming fast. We are doing everything we need to do as fast as we can.”
That includes making the Cadillac brand “the tip of the corporate spear” on electrification, Reuss said. He outlined plans to launch a new generation of electric vehicles that would be “profitable… and attainable.”
The automaker said Cadillac will become GM’s lead electric vehicle brand as the largest US automaker gears up to introduce a new model under that luxury brand to challenge Tesla, a development first reported by Reuters on Thursday.
Tesla’s market capitalisation is higher than GM’s, even though the electric carmaker has never posted a full-year profit.
GM is relying on profit from sales of large pick-up trucks and sport utility vehicles in North America to fund its electrification push. The battle in that lucrative market is intensifying among the Detroit Three automakers as sales of small cars in the United States shrivel. Both GM and Fiat Chrysler Automobiles NV have launched revamped pick-up trucks in a bid to take more share in the US auto industry’s most profitable segment.
— Reuters