GM says pickup trucks to lift 2019 earnings; shares jump

General Motors Co said yesterday its revamped pickup truck lineup will boost its 2019 earnings and Cadillac will become its lead electric vehicle brand, sending the No 1 US automaker’s shares up more than 8%. GM said that despite an industrywide decline in US passenger car sales, the overall market would remain resilient in 2019 with sales of a little over 17mn units in 2019.

The company has spent the last two years exiting unprofitable markets in Europe, parts of Africa and Asia.

In November it put five North American factories, including four in the United States, on notice for closure, and cut almost 15,000 jobs. The plan to close US assembly plants drew bipartisan wrath from Washington.

US President Donald Trump threat-

ened to withdraw government tax and other incentives from GM.

“Because of the actions we have been taking for several years, General Motors enters 2019 leaner, more agile and positioned to win,” chief executive officer Mary Barra said during a presentation to investors in New York.

“We have demonstrated time and again that we are willing to make tough and strategic decisions to not only meet our commitments but to secure the company’s future.”

The battle for profits from sales of large pickup trucks is intensifying among the Detroit Three automakers as sales of small cars in the United States shrivel.

Both GM and Fiat Chrysler Automobiles NV (FCA) have launched revamped pickup trucks in a bid to take more share in the US auto industry’s most profitable segment.

GM said it expected industry auto sales in China to stay roughly flat in 2019 and that it “will remain agile in responding to shifting market dynamics” while launching more than 20 new or revamped vehicles in that market in 2019.

Auto sales in China have suffered their worst slump in decades, and yesterday Reuters reported that China plans to set a lower target for economic growth in 2019, in part reflecting the impact of the trade war with the United States.

GM, with its Chinese partners, sells more vehicles in China than in the United States.

The automaker builds locally most of the vehicles it sells in China.

GM’s outlook for China runs counter to recent gloomy forecasts from other corporate titans.

Apple Inc, for instance, last week took the rare step of cutting its quarterly sales forecast, blaming slowing iPhone sales in China.

The automaker said Cadillac will become GM’s lead electric vehicle brand as the largest US automaker gears up to introduce a new model under that luxury brand to challenge Tesla Inc, a development first reported by Reuters on Thursday. Tesla’s market capitalization is higher than GM’s, even though the electric car maker has never posted a full-year profit.

GM said it expects 2019 adjusted earnings per share in the range of $6.50 to $7.00, above the $5.86 expected by analysts according to IBES data from Refinitiv.

“Bottom line, we believe management just reset the bar higher for earnings and cash flow despite increased macro concerns among investors,” Buckingham Research Group analyst Joseph Amaturo wrote in a client note.

The company said it expects adjusted automotive free cash flow in 2019 to come in between $4.5bn and $6bn.

“We are focused on strengthening our cash generation and creating efficiencies that will position us to take advantage of opportunities through the cycle,” GM chief financial officer Dhivya Suryadevara said in a statement.

GM said that it also expects its 2018 earnings per share to come in above its previous forecast.

The car maker said in October it expected adjusted 2018 earnings of $5.80-$6.20 per share.

The company also expects adjusted free cash flow for 2018 to be above its previous guidance of $4bn.

The automaker lowered that 2018 cash flow figure, which excludes the impact of $600mn in pension contributions, last year due to the impact of tariffs imposed by Trump.

Still, CEO Barra faces pressure to lift GM’s share price, which has lagged broader market performance.

The company has confronted challenges from activist shareholders twice during the past four years.

In morning trading on the New York Stock Exchange, GM shares were up 8.4% at $37.65. Ford Motor Co shares were trading up 2% at $8.84 and FCA was up 2.5% at $16.41. Tesla shares were down 0.9% at $341.80.

GM said it expected industry auto sales in China to stay roughly flat in 2019 and that it “will remain agile in responding to shifting market dynamics” while launching more than 20 new or revamped vehicles in that market in 2019