GM Says 2017 Earnings Should Top Its Expectations for 2016 -- Update
11 January 2017 - 7:34AM
Dow Jones News
By Mike Colias
General Motors Co. said pretax earnings this year should beat
the record profit the auto maker expects to post for 2016, and its
board approved a $5 billion share repurchase based on the "strong
outlook."
GM said Tuesday the bright forecast is based on continued
strength in North America -- particularly strong sales of pickup
trucks, SUVs and crossover wagons -- as well as resilient demand in
China and cost cuts from better logistics and other moves.
The company forecasts 2017 pretax operating earnings per share,
adjusted for any special items, of $6 to $6.50, up from a forecast
$5.50 to $6 that it expects to post when the company reports
earnings on Feb. 7. The 2016 result should come in at the
"high-end" of that range," Chief Executive Mary Barra told
reporters ahead of an investor conference in Detroit.
The nation's largest auto maker is benefiting from strong U.S.
demand for pickup trucks and SUVs -- its biggest moneymakers --
stoked by low gasoline prices and interest rates. It has also
leveraged its strength in China, where a tax cut on some vehicles
last year helped increase GM's sales in its biggest market to a
record 3.9 million vehicles.
GM also said its results in South America -- hard hit by the
recession and political instability -- should improve in 2017. But
executives expressed a cautious view in Europe due to the unfolding
impact of Brexit.
Shares rose more than 4% after the company issued the 2017
forecast.
Asked about uncertainty caused by President-elect Donald Trump's
recent threats of a tariff or border tax on imported vehicles, Ms.
Barra said it is too early to speculate on an eventual effect but
reiterated the complexity of GM's manufacturing footprint and the
long lead times of production decisions.
"We think there are many things we can do working with the
administration that are going to make America great again, that
will strengthen business, that will strengthen growth," she
said.
While Mr. Trump's policy intentions remain unclear, GM could be
a more of a target for the president-elect than rival Ford Motor
Co. Ford made the equivalent of 95% of the vehicles it sold
locally, according to WardsAuto data for the first 11 months of
2016. For GM, that figure was 83% and 69% for Fiat Chrysler
Automobiles.
Mr. Trump said in a Twitter message last week that GM should
face a "big border tax" for importing Chevrolet small cars from
Mexico. Ms. Barra has said the company doesn't plan to rejigger its
production plans.
Auto executives are on edge as Mr. Trump widens his criticism of
vehicle imports. Tweets going after GM and Toyota Motor Corp.
followed long-running criticism of Ford's plans to build a new
plant in Mexico. Ford scrapped that plan last week, though it
described the move as a business decision that it would have made
anyway.
GM's stock repurchase pushes the total of its buyback program,
first announced in March 2015, to $14 billion. About $6 billion of
that total has been completed.
The company said a fresher vehicle lineup globally will help its
bottom line in coming years, because newer cars typically command
higher purchase prices. The auto maker said 38% of its global sales
volume from 2017 to 2020 will be new or redesigned, versus 26% over
the last six years. The company said those vehicles will be more
heavily weighted toward trucks, which carry higher margins.
Stephen Wilmot contributed to this article.
(END) Dow Jones Newswires
January 10, 2017 15:19 ET (20:19 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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