GM up­beat as it tight­ens the belt

The Detroit News - - FRONT PAGE - BY NORA NAUGHTON The Detroit News

Gen­eral Mo­tors Co. is feel­ing op­ti­mistic about the year ahead de­spite a grow­ing list of un­cer­tain­ties, fore­cast­ing slight fi­nan­cial growth for the year as it read­ies a new elec­tric-vehicle plat­form.

GM is fore­cast­ing earn­ings per share be­tween $6.50 and $7 and free cash-flow of up to $6 bil­lion for 2019, as a sweep­ing re­struc­tur­ing plan ex­e­cuted this year saves the com­pany up to $2.5 bil­lion.

The fore­cast for this is par­tially based on GM’s ex­pec­ta­tion that the U.S. vehicle mar­ket will re­main strong this year — pro­ject­ing sales in the low 17 mil­lion range — as the au­tomaker ex­pects strong truck and SUV sales to off­set a

va­ri­ety of costs, in­clud­ing au­tonomous vehicle pro­grams and a new elec­tric vehicle struc­ture, rising com­mod­ity costs, and costs re­lated to re­struc­tur­ing ef­forts.

GM gave its fi­nan­cial guid­ance for 2019 at its Cap­i­tal Mar­kets Day event with investors Fri­day in New York, by­pass­ing the an­nual fore­cast at the Deutsche Bank Global Auto In­dus­try Con­fer­ence tra­di­tion­ally held dur­ing the Detroit auto show’s press week, be­gin­ning this year on Mon­day.

The Detroit au­tomaker is also ad­just­ing its fi­nan­cial guid­ance for 2018, ex­pect­ing now to end the year with earn­ings per share slightly higher than the $5.80 to $6.20 range ini­tially fore­cast, while also ex­ceed­ing the pre­vi­ously es­ti­mated $4 bil­lion in free cash flow. GM did not spec­ify its up­dated free cash-flow pro­jec­tion.

“GM is trans­form­ing,” CEO Mary Barra said dur­ing a press con­fer­ence prior to the Cap­i­tal Mar­kets Day pre­sen­ta­tion. Barra said the com­pany’s plans to strengthen the core busi­ness are nec­es­sary to take a lead­er­ship po­si­tion in the fu­ture of the au­to­mo­tive busi­ness.

“We be­lieve that we, as Gen­eral Mo­tors, can lead this trans­for­ma­tion and re­ally de­fine the next gen­er­a­tion of how peo­ple will move from point A to point B,” she said.

GM’s stock price soared 7 per­cent on the news Fri­day to close at $37.18.

Cadil­lac will lead GM’s elec­tric vehicle push, con­tin­u­ing the au­tomaker’s march to 20 EVs by 2023. The lux­ury brand is ex­pected to in­tro­duce a new model based on GM’s new elec­tric vehicle ar­chi­tec­ture. The new and more flex­i­ble EV plat­form will ac­com­mo­date a va­ri­ety of body styles and will be of­fered in front-, rear- and all­wheel drive con­fig­u­ra­tions, GM said Fri­day.

The new elec­tric vehicle plat­form will be ex­clu­sive to Cadil­lac when it launches in 2021, GM Pres­i­dent Mark Reuss said.

GM has been slowly re­struc­tur­ing its lead­er­ship to ready for this pivot, pro­mot­ing for­mer elec­tric-vehicle de­vel­op­ment chief Pamela Fletcher to the se­nior lead­er­ship team in Septem­ber and el­e­vat­ing for­mer global prod­uct chief Reuss to pres­i­dent of GM ear­lier this year. The Cadil­lac brand also moved un­der Reuss’ su­per­vi­sion last year when the brand ditched New York for War­ren.

GM’s rosy out­look for 2019 bucks an­a­lyst ex­pec­ta­tions that the Detroit au­tomaker would fore­cast a more chal­leng­ing year, which would have set an un­easy tone for the North Amer­i­can In­ter­na­tional Auto Show next week. The pos­i­tive fore­cast comes as the com­pany nav­i­gates a sweep­ing re­struc­tur­ing that could see up to five North Amer­i­can plants closed and up­wards of 6,000 whitecol­lar work­ers laid off.

On the Mon­day after Thanks­giv­ing, GM an­nounced a plan for 2019 that would in­clude cut­ting 15 per­cent of its white-col­lar staff — some 8,000 work­ers — and re­con­sider the vi­a­bil­ity of five man­u­fac­tur­ing fa­cil­i­ties in North Amer­ica, af­fect­ing some 6,300 blue-col­lar em­ploy­ees in the U.S. and Canada.

Detroit-Ham­tramck Assembly, War­ren Trans­mis­sion, Bal­ti­more Op­er­a­tions and Lord­stown Assembly in north­east­ern Ohio will all cease pro­duc­tion by Aug. 1, while Oshawa Assembly in On­tario will shut­ter in the fourth quar­ter. Union of­fi­cials in the U.S. and Canada have blasted GM for in­vest­ing in its Mex­i­can man­u­fac­tur­ing fa­cil­i­ties as it shut­ters the union-rep­re­sented shops.

United Auto Work­ers vice pres­i­dent and head of the GM de­part­ment Terry Dittes re­acted to the Detroit au­tomaker’s plans for Cadil­lac’s new elec­tric vehicle by en­cour­ag­ing GM to build it in the U.S.

“Gen­eral Mo­tors builds some of the finest cars, trucks, crossovers, SUVs and vans right here in the USA,” Dittes said in a Fri­day state­ment. “We are hope­ful that these new prod­ucts will be built here to show a com­mit­ment to all of Amer­ica. We in­vested in GM. Now it is time for GM to in­vest its fu­ture in us.”

GM an­nounced late last year that it had job op­por­tu­ni­ties for 2,700 of the 2,800 UAW-rep­re­sented work­ers af­fected by the clos­ings of Detroit-Ham­tramck, War­ren Trans­mis­sion, Bal­ti­more Op­er­a­tions and Lord­stown Assembly. Barra said Fri­day that 1,500 work­ers in those fa­cil­i­ties have already vol­un­teered for trans­fer and about 700 are en route to new jobs at Flint Assembly and Spring Hill Man­u­fac­tur­ing in Ten­nessee.

When pro­duc­tion stops at those plants this year, the slowselling prod­ucts they build will be cut from the U.S. lineup. Those ve­hi­cles are the Buick LaCrosse, Cadil­lac CT6 and XTS, and Chevro­let Volt, Cruze and Im­pala.

Reuss ap­peared to walk back the demise of the CT6, say­ing that reports it will go away when pro­duc­tion ends at Detroit-Ham­tramck later this year are “spec­u­la­tory.” Reuss said Cadil­lac will still need a flag­ship like the CT6 to com­pete with Euro­pean lux­ury au­tomak­ers.

As GM leans into elec­tric ve­hi­cles in 2019, the emis­sion-free cars are also the un­der­pin­ning of GM’s plans for a driver­less taxi fleet. GM’s au­tonomous test vehicle, the Cruise AV, is based on the bat­tery-elec­tric Chevro­let Bolt EV.

Nearly a year ago, GM filed a pe­ti­tion with the National High­way Traf­fic Safety Ad­min­is­tra­tion to de­ploy a self-driv­ing fleet of elec­tric ve­hi­cles — sans steer­ing wheel and brake pedal — on pub­lic roads in 2019.

The au­tomaker and its au­tonomous vehicle de­vel­op­ment arm GM Cruise LLC have been largely quiet about the progress of that project since the an­nounce­ment ahead of last year’s Detroit auto show, but GM said in its state­ment Fri­day that the project is still on track for this year. Barra said GM’s in­vest­ments in au­tonomous ve­hi­cles in 2019 will likely match the ex­pected $1 bil­lion in­vest­ment in the program in 2018.

In the mean­time, GM Cruise has at­tracted bil­lions of dol­lars in in­vest­ments, in­clud­ing $2.25 bil­lion from Ja­panese in­vest­ment firm SoftBank In­vest­ment Ad­vis­ers and $2.75 bil­lion from Honda Motor Co. as part of an al­liance on fu­ture au­tonomous vehicle de­vel­op­ment.

Glob­ally, GM says it will launch an all-new port­fo­lio of ve­hi­cles first for China in 2019 and then for South Amer­ica and Mex­ico. GM says it has low­ered its break-even point in South Amer­ica by 40 per­cent.

De­spite some con­trac­tion in the Chi­nese mar­ket at the end of 2018, GM says it is still po­si­tioned for “long-term growth.” The au­tomaker says it will launch more than 20 all-new or re­freshed ve­hi­cles in China in 2019, in­clud­ing com­pact cars, crossovers and “new-en­ergy” ve­hi­cles.

GM CFO Dhivya Suryade­vara said the com­pany ex­pects “a mod­er­ate de­cline in eq­uity in­come year over year” in China, and while GM is see­ing re­cov­ery in South Amer­ica “the ef­fects are un­known.”

Barra hinted repeatedly that GM is con­sid­er­ing ex­it­ing South Amer­ica. Brazil and Ar­gentina, GM’s largest South Amer­i­can mar­kets, con­tinue to prove chal­leng­ing, she said. The com­pany is work­ing with “key stake­hold­ers” in the re­gion to take all nec­es­sary ac­tions to ei­ther im­prove the busi­ness “or con­sider other op­tions.”

Said Barra: “We are not go­ing to keep de­ploy­ing cap­i­tal to lose money.”

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