General Motors Says Earnings On Record Pace -- WSJ

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, adjusted for any special items, of $6 to $6.50 a share; that compares with the $5.50 to $6 it expects to post in financial results due out 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 recession and political instability -- should improve in 2017. But executives expressed a cautious view in Europe due to the unfolding impact of Brexit.

The company'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.

GM shares were ahead 3.8% at $37.28 Tuesday afternoon after the company issued its 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 more of a target for the president-elect than rival Ford Motor Co. Ford made the equivalent of 95% of the vehicles it sold in the U.S. at domestic plants, according to WardsAuto data for the first 11 months of 2016. That figure was 83% for GM and 69% for Fiat Chrysler Automobiles NV.

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 GM 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 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 11, 2017 02:48 ET (07:48 GMT)

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