High-margin pickup trucks drive GM profit\, shares rise

High-margin pickup trucks drive GM profit, shares rise

Reuters  |  DETROIT 

By Nick and Ben Klayman

All of the No. 1 U.S. 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 and combined added nothing to the company's bottom line in the quarter. Shares rose 1.4 percent.

The stronger-than-expected fourth-quarter profit, driven by strong U.S. results, stood in contrast to the job cuts GM has begun to make in its salaried and hourly workforces.

The automaker has received political blowback, including from U.S. Donald Trump, after announcing in late November it would not allocate new product to five plants in that mostly produce less-popular sedan models, indicating they will likely close.

GM 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 percent utilization," Barra said 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 percent 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 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.

GM said on Wednesday that China's $300 million in operating earnings in the fourth quarter was offset by other international markets. It sold fewer vehicles in China, its largest market by volume, and said weak currencies in had also impacted results.

"Our outlook for overall is for the auto industry to be flat year over year," told reporters. "If you take a look at some of these economic indicators coming out of China, there are early signs of stabilization."

said in a research note he remains concerned longer-term about vehicle pricing in and North America, as well as demand in China. If China slumps, GM would be challenged to hit its financial targets, he said.

Late last month, rival posted a lower fourth-quarter profit as losses in every region except weighed on results.

Earlier Wednesday, posted a slightly higher profit as demand for its from cost-conscious Chinese buyers helped offset weak North American sales of its marquee sedan models such as the and

U.S. new vehicle sales are expected to drop in 2019 due to rising interest rates and competition from a surfeit of cheaper, nearly-new used vehicles on the market.

On Wednesday, GM reported fourth-quarter net income of $2.1 billion, or $1.40 per share, versus a loss of $5.2 billion, or $3.65 per share, a year earlier. Excluding one-time items, it earned $1.43, above the $1.22 analysts polled by Refinitiv IBES had expected.

It reported a fourth-quarter loss in 2017 to adjust for an overhaul of the U.S. tax system. Excluding those charges, the automaker had reported net income of $2.4 billion.

The company maintained its full-year 2019 adjusted earnings forecast of between $6.50 and $7 per share.

(Reporting by Nick and Ben in Detroit; Editing by Nick Zieminski)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, February 06 2019. 23:23 IST