DETROIT -- General Motors is forecasting its financial results this year to be in line with expected earnings in 2017, followed by an "even better" performance in 2019.
The automaker released its guidance Tuesday morning, predicting record 2017 earnings per share at the "high end" of its previously stated range of $6-$6.50 -- a key metric for how Wall Street judges the company.
“’17 was a very good year for General Motors,” GM CEO Mary Barra told media ahead of presenting at the 2018 Deutsche Bank Global Automotive Conference. “We continued to transform the company to be more focused and more resilient.”
Barra, in a statement, said the company is positioned for “another strong year in 2018 and an even better one in 2019."
The company also announced an increased investment in autonomous vehicles to $1 billion and a onetime noncash charge of $7 billion as a result of the Trump administration’s tax reform.
GM shares on Tuesday initially gained more than 3 percent on the news, but finished the day up 0.3 percent to $44.19.
GM's 2017 forecast included adjusted cash flow of about $6 billion; earnings before interest and taxes in line with 2016; and North American profit margins of more than 10 percent.
In 2016, GM posted global net income of $9.4 billion, down from $9.7 billion the previous year. Adjusted earnings before interest and taxes rose 16 percent to $12.5 billion, as revenue rose 9.2 percent to $166.4 billion. Automotive-adjusted free cash flow more than tripled to $6.9 billion.
AVs and EVs
GM expects about $8.5 billion in capital expenditures in 2018. It also plans to spend about $1 billion on Cruise Automation and autonomous vehicles, up from a run rate of $600 million. Some of the AV investment is expected to be included in capital expenditures, but “most of it” is on engineering, according to GM President Dan Ammann.
“There’s a very, very big business opportunity here, very significant,” he said. “In order to get to that business opportunity, the first thing we need to do is to safely deploy the technology at scale. Everything we’re doing right now is focused on that.”
The company announced plans last week to launch public driverless ride-hailing fleets without manual controls such as steering wheels and petals in 2019. The fourth-generation AVs are based on the Chevrolet Bolt EV.
Barra declined to disclose how much the company plans to spend on battery development and electric vehicles, as it plans to launch 20 EVs and fuel cell vehicles by 2023.
GM’s largest crosstown rival, Ford Motor Co., on Monday announced it would spend $11 billion by 2022 to introduce 40 electrified vehicles: including 16 EVs and 24 gasoline-electric hybrids or plug-in hybrids
Tax reform
The $7 billion writedown in the fourth quarter was a result of the Trump administration's recently passed tax bill. The noncash reduction in tax assets, which GM previously said would occur if the tax reform was passed, does not impact its earnings.
Overall, GM sees the 2017 Tax Cuts and Jobs Act, which some have criticized for lowering the corporate tax rate, as a “benefit” for the U.S. economy, which should in turn help car sales.
GM, according to Barra, does not plan to award its employees with bonuses or other increased financial incentives as a result of the lower tax rate, as some other companies have done.
Barra said the automaker already maintains financial incentives such as results-based bonuses for salaried workers and profit-sharing for UAW-represented employees. Tax reform is expected to have a trickle-down effect on those existing incentives.
“We think that system works. It keeps goal alignment. That’s how the benefits, as they flow through the company, will flow into profit-sharing and to the overall portfolio.”
Fiat Chrysler Automobiles last week said it would award $2,000 bonuses to about 60,000 FCA hourly and salaried employees in the U.S., excluding senior leadership, as a result of the change in taxes.
Trucks and Cadillac
GM is expected to begin production of the "more profitable" 2019 Chevy Silverado and 2019 GMC Sierra full-size pickups in the fall. It also plans to re-enter the medium-duty pickup market with new Class 4 and Class 5 commercial trucks, which will be unveiled in March.
The pickups are expected to be followed by other redesigned trucks and SUVs, which the company said contributes $65 billion in revenue.
In 2019, Cadillac also is expected to offer a slate of long-awaited products that GM CFO Chuck Stevens said expects to double the brand’s profits by 2021. He declined to provide what the current earnings are for the “significantly profitable business.”
GM expects Cadillac’s global sales to rise to the high 500,000s by 2021.
In 2017, the brand delivered 356,467 vehicles worldwide, a 16 percent increase over 2016 and its second-highest sales ever. Its global sales peaked at 360,825 in 1978, with most of the volume in the U.S.
Stevens said, “the biggest driver” of Cadillac’s profit growth is expected to come from the United States, which was overtaken by China as the brand’s top-selling market in 2017.
Cadillac’s lineup currently is made up of the Escalade large SUV and four car nameplates, but only one crossover, the XT5. By 2022, Cadillac is expected to have four crossovers and just three cars, plus the next-generation Escalade.
