GM’s financial forecast is upbeat for 2019

GM’s financial forecast is upbeat for 2019
Nora Naughton, The Detroit NewsPublished 9:00 a.m. ET Jan. 11, 2019 | Updated 9:00 a.m. ET Jan. 11, 2019

File: General Motors headquarters is seen in the Renaissance Center in Detroit (Photo: Stan Honda, Getty Images)
General Motors Co. is expecting slight financial growth in 2019, forecasting earnings per share between $6.50 and $7 as the automaker relies on strong truck and SUV sales to offset restructuring costs and investments in a new electric vehicle platform.
The forecast for 2019 is partially based on GM’s expectation that the U.S. vehicle market will remain strong this year, projecting sales in the low 17-million range. GM is expecting its sweeping restructuring efforts, which include cutting 8,000 white-collar jobs and indefinitely idling five North American plants, to save the company up to $2.5 billion in 2019.
The Detroit automaker is also adjusting its financial guidance for 2018, expecting now to end the year with earnings per share of $6.20 — up from the estimated $5.80 at the end of the third quarter — while also exceeding the previously estimated $4 billion in free cash flow. GM did not specify its updated free cash flow projection.
“GM is transforming,” CEO Mary Barra said during a press conference prior to the automaker’s Capital Markets Day presentation for investors Friday in New York. Barra said the company’s plans to strengthen the core business are necessary to take a leadership position in the future of the automotive business.
“We believe that we, as General Motors, can lead this transformation and really define the next generation of how people will move from point A to point B,” she said.
Cadillac will lead GM’s electric vehicle push in 2019, the start of the automaker’s march to 20 EVs by 2023. The luxury brand is expected to introduce a new model this year based on GM’s new electric vehicle architecture. The new and more flexible EV platform will accommodate a variety of body styles and will be offered in front-, rear- and all-wheel drive configurations, GM said Friday in its 2019 forecast.
The new electric vehicle platform will be exclusive to Cadillac when it launches in 2021, GM President Mark Reuss said.
GM has been slowly restructuring its leadership to ready for this pivot, promoting former electric vehicle development chief Pamela Fletcher to the senior leadership team in September and elevating former global product chief Reuss to president of GMearlier this year. The Cadillac brand also moved under Reuss’s supervision last year when the brand ditched New York for Warren.
GM’s rosy outlook for 2019 bucks analyst expectations that the Detroit automaker would forecast a more challenging year, which would have set an uneasy tone for the North American International Auto Show next week. The positive forecast comes as the company navigates a sweeping restructuring that could see up to five North American plants closed and upwards of 6,000 white-collar workers laid off.
On the Monday after Thanksgiving, GM announced a plan for 2019 that would include cutting 15 percent of its white collar staff — some 8,000 workers — and reconsider the viability of five manufacturing facilities in North America, affecting some 6,300 blue-collar employees in the U.S. and Canada.
Detroit-Hamtramck Assembly, Warren Transmission, Baltimore Operations and Lordstown Assembly in Northeastern Ohio will all cease production by Aug. 1, while Oshawa Assembly in Ontario will shutter in the fourth quarter. Union officials in the U.S. and Canada have blasted GM for investing in its Mexican manufacturing facilities as it shutters the union-represented shops.
When production stops at those plants this year, the slow-selling products they build will be cut from the U.S. lineup. Those vehicles are the Buick LaCrosse, Cadillac CT6 and XTS, and Chevrolet Volt, Cruze and Impala.
Reuss appeared to walk back the demise of the CT6, saying that reports it will go away when production ends at Detroit-Hamtramck later this year are “speculatory.” Reuss said Cadillac will still need a flagship like the CT6 to compete with European luxury automakers.
As GM leans into electric vehicles in 2019, the emission-free cars are also the underpinning of GM’s plans for a driverless taxi fleet. GM’s autonomous test vehicle, the Cruise AV, is based on the battery-electric Chevrolet Bolt EV.
Nearly a year ago, GM filed a petition with the National Highway Traffic Safety Administration to deploy a self-driving fleet of electric vehicles — sans steering wheel and brake pedal — on public roads in 2019.
The automaker and its autonomous vehicle development arm GM Cruise LLC have been largely quiet about the progress of that project since the announcement ahead of last year’s Detroit auto show, but GM said in its statement Friday that the project is still on track for this year. Barra said GM’s investments in autonomous vehicles in 2019 will likely match the expected $1 billion investment in the program in 2018.
In the meantime, GM Cruise has attracted billions of dollars in investments, including $2.25 billion from Japanese investment firm SoftBank Investment Advisers and $2.75 billion from Honda Motor Co. as part of an alliance on future autonomous vehicle development.
Globally, GM says it will launch an all-new portfolio of vehicles first for China in 2019 and then for South America and Mexico. GM says it has lowered its breakeven point in South America by 40 percent.
Despite some contraction in the Chinese market at the end of 2018, GM says it is still positioned for “long-term growth.” The automaker says it will launch more than 20 all-new or refreshed vehicles in China in 2019, including compact cars, crossovers and “new-energy” vehicles.
GM CFO Dhivya Suryadevara said the company expects “a moderate decline in equity income year over year” in China, and while GM is seeing recovery in South America “the effects are unknown.”
nnaughton@detroitnews.com

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