General Motors exudes optimism, raises outlook for 2017
By TOM KRISHER
Wednesday, January 11, 2017
DETROIT — Optimistic executives at General Motors say strong sales in two core markets, the U.S. and China, along with cost-cutting will power the company to higher profits in 2017.
CEO Mary Barra and President Dan Ammann told a Deutsche Bank auto industry conference in Detroit to expect pretax adjusted earnings per share of $6 to $6.50 this year, up 50 cents from guidance issued for 2016. GM also said 2016 earnings would be at the high end of its guidance of $5.50 to $6 per share. GM reports 2016 results next month.
Barra said revenue would be higher this year than last, with an improved pretax profit margin, which was 8 percent in the third quarter.
She also addressed the incoming Trump administration, which has criticized the auto industry and GM specifically for building cars in Mexico instead of in the U.S. with American workers. She said she plans to stress GM's record as a job creator in the U.S. when she speaks to Trump.
GM also said it will buy back another $5 billion in stock. GM shares were up 4 percent to $37.45 in afternoon trading after hitting a 52-week high of $38.16 shortly after the outlook was issued.
The big driver of GM's optimism continues to be North America, where the company makes the bulk of its profits. Ammann predicted continued strong sales, especially as it rolls out more new SUVs, which have been the sweet spot of the market. Sales of GM's big SUVs, including the Chevy Tahoe and GMC Yukon, rose by double-digits last year, according to Autodata. GM unveiled an updated version of the smaller GMC Terrain at the Detroit auto show this week.
The company also expects more of the same from its joint venture with the Chinese government. Ammann said China is heading from a super-high-growth economy to a maturing one with growth slowing. But buyers are going for more expensive vehicles as the economy matures, he said.
"We see from a macroeconomic point of view pretty robust underpinnings for another good year, absent an external shock," Ammann told reporters before the presentation.
GM also added $1 billion to its annual cost-savings target, raising it to $6.5 billion through 2018. Already it has cut administrative, material, logistics and manufacturing costs by $4 billion per year from 2014 levels.
Barra gave a glimpse into GM's strategy for dealing with President-elect Donald Trump, who has threatened the company with a tax for importing compact cars from a factory in Mexico. Barra said GM doesn't plan to change where it makes vehicles and plans to emphasize to the Trump administration that complex production decisions were made years ago. She said the company already is helping to grow jobs and the economy in the U.S.
"We look forward to having the conversation with the administration with the president-elect to make sure that they also understand the number of jobs we already produce," said Barra, who is among a group of CEOs advising Trump on the economy. The company has invested over $11 billion in the US in the past two years to preserve or add jobs and employs more than 100,000 people in the country, she said.