DETROIT: General Motors Co reported a quarterly profit that exceeded Wall Street expectations, thanks to high-margin pickup trucks and small SUVs in the US market and cost cutting.
All of the No. 1 US automaker’s profit came from North America, where those lucrative models helped overcome an overall drop in the number of vehicles it sold. The company’s operations in China and South America combined added nothing to the company’s bottom line in the quarter. Shares rose 1.4 per cent.
The stronger-than-expected fourth-quarter profit, driven by strong US results, stood in contrast to the job cuts GM has begun to make in its salaried and hourly workforces.
The Detroit automaker has received political blowback, including from US President Donald Trump, after announcing in late November it would not allocate new product to five plants in North America that mostly produce less-popular sedan models, indicating they will likely close.
GM Chief Executive Mary Barra has made it clear that, despite the criticism, the cutbacks are necessary for the automaker’s long-term financial stability and to pay for the development of electric and self-driving vehicles.
“We can’t run at a 70 per cent utilisation,” Barra said on Wednesday about the company’s plant usage rate. “We had to improve that ... It’s a transition we have to go through.” An industry rule of thumb is that automakers’ lose money when plants operate below 80 per cent capacity.
Barra also cited the company’s efforts to shift many of the affected hourly workers to other plants, lessening the impact of the cuts among blue-collar workers.
GM said on Monday it was starting to cut about 4,000 salaried workers in the latest round of restructuring announced in November.
It said then it would take pre-tax charges of $3 billion to $3.8 billion to pay for the cutbacks, but expected the actions to improve annual free cash flow by $6 billion by the end of 2020. GM has said commodity and trade costs would hurt 2019 results by $1 billion. — Reuters
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