GM Makes Record Profits in 2017, Sales to Stagnate in 2018

General Motors Headquarters in Detroit, Michigan

General Motors expects the biggest profits in its history for 2017 but these could stagnate in 2018 before bouncing back in 2019 with the launch of new pickups and large SUVs.

General Motors Headquarters in Detroit, Michigan

General Motors Headquarters in Detroit, Michigan/Pixabay

GM’s Earnings per share adjusted for exceptional items, a benchmark in North America, will be “at the high end of the range of $ 6 to $ 6.50” of GM’s latest forecast, a record high, according to the largest US automaker whose financial for the year 2017 results will be announced on February 6th. Analysts anticipate them to be at 6.3 dollars.

On Wall Street, GM’s stock price gained about 3% on early Tuesday.

“We had a very good year in 2017,” said Mary Barra, CEO of General Motors, welcoming strong vehicle sales in China and the United States, the world’s two largest markets. “We are in a good position for another solid year in 2018 and even better in 2019”.

The 2018 earnings should be “in line” with those of 2017, a stagnation that is explained, according to GM, by its offensive on the ultra-competitive market of large cars (pickups, SUVs and crossovers) to offset the anticipated decline in sedan sales in the coming months.

The group presented Saturday at the Detroit show a new version of the Chevrolet Silverado, the second best-selling vehicle in the United States in 2017, and will market in the coming months the big SUV GMC Sierra.

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Big pick-ups with high profit margins made up nearly a third of the 3 million vehicles sold in the United States in 2017 by GM. This segment alone could represent more than $65 billion in sales in the future. In 2016, GM’s revenue totaled $149 billion.

After abandoning the big car market during the financial crisis, Americans have been rushing back to them as a result of the rebound in growth, the drop in the unemployment rate to its lowest levels and the low price of gasoline at the pump.

GM, which in 2017 signaled its exit from Europe by completing the sale of its European subsidiary Opel/ Vauxhall to the French conglomerate PSA, will also record a special accounting expense of $7 billion in its accounts for the fourth quarter despite to the tax reform recently adopted in the United States.

This charge related to “depreciation” of assets will have no impact on the results, said the Detroit giant, adding that the reform, which massively lowers taxes for businesses and consumers, should eventually have positive effects for the company.

Chuck Stevens, the finance director, assured at a press point with reporters that this reform will not affect either the company’s investments or its factories.

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Fiat Chrysler, GM’s rival, announced last week its plan to create 2,500 jobs in the United States and repatriate to the United States the production of its Ram 1500 pickup, so far assembled in Mexico.

This decision, applauded by US President Donald Trump, was motivated, according to Fiat Chrysler, by the reduction of corporate income tax from 35 to 21%.

GM does not plan to pay an exceptional bonus to its employees as its rival did and prefers to highlight its investments in mobility services, electric and autonomous vehicles, considered the future of the automobile.

The US government will soon consider a request from the manufacturer to test a car without a wheel or pedals as part of its development program for a self-driving vehicle that it wants to put on the road in 2019.

China, where GM’s Cadillac and Buick brands are very popular, and other international markets are also important growth drivers. GM also hopes to earn money in 2019 in countries like Russia and regions such as South America, yet in the red in 2016.

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Carl Frantz

Polyglot, humanitarian, Carl was born in Germany but raised in the USA. He writes mostly on tech, science and culture.