SUV revamp pads profits for GMin slowdown
AUTOS Automaker sees steady earnings for the next year
SOUTHFIELD, MICH. • Booming sales of new sport utility vehicles helped Gen
eral Motors Co. set a profit record last year and is giving the automaker impetus to forecast steady earnings in 2018.
Even as sales at home slowed, GM posted adjusted profit of US$1.65 a share for the fourth quarter, beating analysts’ average estimate of US$ 1.38 a share. The company made up for shipping fewer vehicles to dealers by delivering pricier models and cutting costs.
“We couldn’ t be more pleased with our results and disciplined execution,” chief financial officer Chuck Stevens told reporters Tuesday at the company’s headquarters in Detroit. “North American earnings and pricing has been a benefit. What has really driven results in North America has been our focus on cost. It’s a combination.”
GM’s earnings strength has been fuelled by several new crossovers that were redesigned as American consumers pour into more spacious models.
Both the compact Chevrolet Equinox and larger Traverse hadn’t been completely overhauled since around the time GM emerged from bankruptcy, giving the company an opportunity to make up for lost time in a big way.
The stock jumped 18 per cent in 2017.
Two big charges last year led GM to report net losses of US$ 5.15 billion for the quarter and US$ 3.86 billion for 2017.
The U. S. tax bill made t he company ’ s deferred tax assets less valuable, re- sulting in a US$ 7.3- billion non- cash charge in the last three months of the year. The automaker also took a US$6.2-billion charge in the third quarter related to the sale of its European units Opel and Vauxhall to the French carmaker PSA Group.
Sales of the Equinox rose 20 per cent in the U. S. last year and the more expensive Traverse grew 5.8 per cent. The new Equinox sold for an average price of almost US$25,700 last month, up more than US$ 3,000 from the average last year for 2017 models. The Traverse sells for an average of about US$ 36,800, up about US$7,000, according to GM.
GM also started selling redesigned versions of the Buick Enclave and GMC Terrain last year. Its Cadillac XT5 crossover made major gains, with U. S. deliveries surging 73 per cent in 2017. Demand for the luxury brand is rapidly growing among Chinese consumers, with the division expecting global profit to double by 2021.
The SUV strength blunted the impact on GM from the seven-year streak of U. S. auto industry sales growth coming to an end last year.
Other automakers haven’t weathered the storm as well, with Ford Motor Co.’s fourthquarter earnings prompting the stock’s biggest sell- off in almost 18 months.
Ford’s plan to finally enter the fast- growing small SUV segment in the U. S. — an area where GM’s Buick Encore has been competing since 2013 — could help it play catch up this year.
GM Financial, the automaker’s in- house l ender, should keep growing this year, Stevens said. Profit increased by about US$ 400 million to US$1.2 billion last year. The unit should eventually finance 55 per cent to 60 per cent of GM’s retail sales in the U.S., up from about 40 per cent in 2017, according to the CFO.
GM’s earnings for the year will prompt the firm to pay its 50,000 union workers a bonus of US$ 11,750, spokesman Tom Henderson said.
Full-year earnings in 2018 will be in line with US$ 6.62 a share for 2017, according to the company. Executives are forecasting steady profit, even as the carmaker plans to idle truck plants so they can change over to building revamped Chevrolet Silverado and GMC Sierra pickups.