General Motors Chairman and CEO Mary Barra told analysts Tuesday GM expects to exceed its 2017 profitability in North America and China.
(Photo: Steve Fecht for General Motors)
General Motors expects its 2018 profit to be in line with earnings from 2017, details of which it will report Feb. 6.
But the automaker will not pay a special bonus to employees to reflect the new tax law that cut the rate corporations pay from 35% to 21%. Fiat Chrysler Automobiles announced last week it would pay a one-time $2,000 bonus to all U.S. employees as a result of the tax change.
“We have a compensation system for both represented and salary work force,” Mary Barra, GM chairman and CEO, said Tuesday. “We think that’s where it captures the benefits from tax reform. Last year we gave up to $12,000 in profit-sharing to each of represented employees.”
FCA paid its UAW-represented employees $5,000 in profit-sharing last year.
Analysts are expecting GM to report 2017 earnings of between $6 and $6.50 per share, and management indicated the results will come in at the upper end of that range. The company earned $6.12 per share in 2016.
Barra, GM President Dan Ammann and Chief Financial Officer Chuck Stevens presented the automaker’s outlook for the coming year at the Deutsche Bank Global Auto Industry Conference in Detroit.
The fourth-quarter results will include a $7-billion non-cash writedown reflecting the impact of the tax bill passed by Congress and signed by President Donald Trump last month.
Here’s how that works: General Motors had billions of dollars in what are called “tax-deferred assets” accumulated during the money-losing years leading into the Great Recession and the taxpayer-funded bankruptcy in 2009.
Those assets, which can reduce future tax liability during profitable years, are now worth less because the corporate tax rate was reduced by the new law from 35% to 21%.
That accounting provision will not affect GM’s operating results.
CFO Stevens said while GM regards the new tax law as good for business, the company will not do anything this year it hadn’t already planned to do.
“We are, in essence, just carrying forward with the economic benefits we were already given,” Stevens said.
GM expects slightly weaker industry sales in the U.S. this year with sales in the high 16-million vehicle range, down from 17.2 million in 2017.
One challenge for the company this year will be the production launch of its new full-size pickups: Chevrolet Silverado and GMC Sierra. The new models will be more profitable than the old models, with production of the new trucks beginning in late summer.
“The biggest headwind is the next-generation truck launch,” Stevens said.
While production of the 2018 models will continue, the gradual ramp up for production of the 2019 models could slow sales modestly.
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GM shares rose 23% over the last year as it sold its Opel and Vauxhall brands in Europe, where it lost money in nearly every year since 2000. Investors were heartened by its continuing profits in North America and China, and many experts fed a perception that GM was moving faster than most competitors in preparing for fully autonomous on-demand mobility.
Last week, the company announced it would seek government approval to test a car with no steering wheel or pedals — no option for a human driver.
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That advanced technology segment includes GM’s acquisition of Cruise Automation, a San Francisco self-driving startup, and Strobe, a company that develops the laser-based guidance systems for self-driving vehicles.
In 2016, GM invested $500 million in the ride-sharing app developer Lyft.
Contact Greg Gardner: (313) 222-8848 or ggardner99@freepress.com. Follow him on Twitter @GregGardner12
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