Moneycontrol
Last Updated : Jan 11, 2019 10:25 PM IST | Source: PTI

GM sees higher 2019 profits on job cuts, solid US, China sales

The biggest US automaker forecast 2019 profits of $6.50 to $7.00 a share, compared to the $5.88 now expected by Wall Street analysts.

General Motors projected strong 2019 profits on January 11, fueled by savings from a deep restructuring including job cuts, and by solid sales in the United States and China.

GM, which has faced criticism from President Donald Trump and other US politicians over the planned layoffs, expects $2-2.5 billion in additional profits this year due to the restructuring, pushing its earnings-per-share forecast well above analyst expectations.

The biggest US automaker forecast 2019 profits of $6.50 to $7.00 a share, compared to the $5.88 now expected by Wall Street analysts. GM also said it sees 2018 earnings per share as exceeding analyst expectations.

GM has defended the job cuts as needed to position the company long-term, in part by providing funds to build autonomous cars and other new offerings.

"We are focused on strengthening our cash generation and creating efficiencies that will position us to take advantage of opportunities through the cycle," Chief Financial Officer Dhivya Suryadevara said in a statement.

Shares of the auto giant surged 8.0 percent in morning trading to $37.52. The auto giant also announced plans in 2019 to position its electric cars under the Cadillac brand and to launch a new global line of lower-cost models aimed at emerging markets.

Global markets have been shaken in recent weeks amid worries over slowing global growth due in part to weakness in China amid the trade confrontation with Washington, and to some forecasts indicating the US will tip into recession in 2020.

But GM offered a solid outlook for its home market, estimating overall US sales in 2019 in the "low 17-million range," a good level, and projecting no sales drop in China.

US auto sales are expected to be revved up by new sport-utility vehicles coming to market, and by a full calendar year of sales of pickup trucks unveiled in 2018 that have been hot sellers amid low gasoline prices.

The company plans new launches in China, although it also sees continued pricing pressure. Overall, GM expects a "moderate decline" in profits from China, Suryadevara told reporters GM Chief Executive Mary Barra was upbeat on the prospects for a US-China trade deal, characterizing this week's talks between US and Chinese officials as "constructive." According to news reports the next round of talks is set for late January in Washington.

Barra told reporters it was a "good sign" that the two governments already had plans for additional negotiations, adding that sales in China also could be boosted by government stimulus spending.

GM in December announced a plan to cut thousands of jobs and shutter seven plants worldwide, including five in North America.

The announcement drew heavy criticism not only from Trump, but from Canadian Prime Minister Justin Trudeau, labor unions, senior lawmakers in the US Congress and labor unions.

Barra said the company has no plans for further downsizing at this time. The automaker said Cadillac would become its "lead" electric brand, a shift from the current structure where the first models have been under Chevrolet. The move positions GM to compete with Tesla in the high-end market.

GM said it was on track to launch in 2019 a new global vehicle aimed at emerging markets, beginning in China, followed by South America and Mexico. The vehicles are expected to account for 10 percent of GM's global sales by 2020.
First Published on Jan 11, 2019 10:14 pm
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