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Bloomberg
Swelling inventories, rising incentives and a flat US auto market usually suggest General Motors Co. will be preparing investors for a tough year. Instead, the biggest US automaker on Tuesday posted record annual profit and said it sees more growth on the horizon.
GM expects to match or exceed last year’s results in large part because lucrative sport utility vehicles keep selling strong in North America, where its adjusted profit margin slipped to 8.4 percent in the fourth quarter, from 10 percent a year earlier. Chief Executive Officer Mary Barra has accelerated cost cuts by using levers within GM’s labor contracts to lay off workers making struggling models like the Camaro sports car or Cruze compact.
The moves GM has made early this year to dial back production of flagging cars contrasts with the pressure President Donald Trump has put on the carmaker and its US peers to build new plants at home. To keep profits humming, Barra needs to address inventory that would take about 108 days to work through at last month’s selling rate — more than a month’s worth of extra supply compared with this time last year.
“We expect 2017 to be another very strong year,†Chuck Stevens, GM’s chief financial officer, told reporters Tuesday in Detroit. “On passenger cars, we will continue to be very disciplined in aligning supply and demand. We will react to market dynamics.†GM rose 1.5 percent to $37.40 as of 7:55 a.m. in New York, before the start of regular trading. The shares rose 2.4 percent last year.
GM spent almost $4,600 a vehicle on incentives in January, about 12 percent more than a year earlier, according to Autodata Corp. Dealers are carrying as much as 11 months worth of Buick LaCrosse sedans, the Woodcliff Lake, New Jersey-based researcher said this month.
Boosting profits in spite of the supply challenges may be doable because GM can cut temporary workers at its US plants without paying costly buyouts. The automaker has already eliminated entire shifts at factories making the Cruze and Camaro, as well as the LaCrosse and Cadillac CT6 sedans. When GM dialed back production of the Lacrosse and CT6 at its plant in Hamtramck, Michigan, it cut 638 temporary and 493 full-time staffers, according to a notice filed with the state in December.