GM Posts Fourth-Quarter Net Loss on Factory Strike -- Update
February 05 2020 - 12:12PM
Dow Jones News
By Mike Colias
General Motors Co. eked out a small operating profit in the
fourth quarter despite a crippling strike, and forecasted steady
income this year even as it girds for a slowdown in U.S. and
China.
The company said Wednesday its operating profit in the
October-to-December period plunged 96% to $105 million, reflecting
lost production in October as workers continued to picket its U.S.
plants after the company and union failed to reach a new labor
contract in September.
For the full year, the Detroit auto-making giant posted a $6.7
billion net profit as it commanded higher prices on pickup trucks
and SUVs and squeezed costs in North America.
Shares of GM were basically flat in late morning trading.
Even with the hit from the strike, GM's results show it has
solidified its profitability lead over rival Ford Motor Co.
Ford barely broke-even last year, posting net income of only $47
million, its earnings dented by a multiyear, overseas restructuring
that has yet to return the company to profit growth.
The Dearborn, Mich., auto maker also missed fourth-quarter
profit forecasts and issued a disappointing 2020 outlook on Tuesday
after the market closed. Its shares tumbled about 10% in morning
trading.
Ford's global operating-profit margin last year was 4.1% as the
company continued to confront losses overseas, troubles in the U.S.
launching new models and rising warranty costs stemming from
repairs on older vehicles.
By comparison, GM's operating margin fell to 6.1%, from 8% a
year earlier, reduced by the fallout from the strike.
GM said it should get a lift this year from the rollout of
redesigned versions of the Cadillac Escalade, Chevrolet Suburban
and other big sport-utility vehicles -- among its biggest
moneymakers -- and cost savings from plant closures and
white-collar layoffs last year. But it also expects a pullback in
its two primary markets, China and the U.S.
The nation's largest auto maker by sales said it expects
earnings per share for 2020 to be in the range of $5.75 to $6.25.
Analysts had expected $6.28 on average, according to S&P Global
Market Intelligence.
GM expects operating profit to be flat in 2020, excluding the
impact of the strike and other one-time events from 2019, finance
chief Dhivya Suryadevara said Wednesday. The company's operating
profit in 2019 was $8.4 billion, and the strike cost GM about $3.6
billion in operating profit.
"We continue to execute in a more challenging macro
environment," she said.
GM Chief Executive Mary Barra and other executives are scheduled
to outline their strategic plan to investors in New York later
Wednesday. In her seventh year leading GM, Ms. Barra has struggled
to translate the company's success across many parts of the
business into share-price growth. The company's shares are trading
only slightly above the IPO price of nearly a decade ago.
Meanwhile, Tesla Inc.'s stock has surged more than 20% in recent
days, resulting in a stock-market value of more than $130 billion,
higher than that of GM, Ford and Fiat Chrysler Automobiles NV
combined.
GM on Wednesday plans to highlight aggressive plans for electric
and autonomous cars, according to a presentation posted on its
website. For example, the company said it would expand its Super
Cruise system, which enables hands-free driving on highways.
Tesla's semi-autonomous system is a key selling point for
customers.
Ms. Suryadevara said GM has "unique positioning" in electric and
driverless technology and expressed confidence that investors
eventually will reward that.
GM's San Francisco-based Cruise autonomous-car unit last year
was valued at about $19 billion, roughly half that of GM
itself.
"From a share-price standpoint, we're very bullish on the
future," she said. "What we're going to do is put those proof
points on the board to make sure that that's clear to all
investors."
The United Auto Workers' strike, which idled dozens of GM's U.S.
factories and even suspended vehicle production in Mexico,
punctuated a difficult year for GM.
The company took heat from President Trump and other elected
officials for closing several U.S. factories. It lost market share
in the lucrative pickup-truck category. Sales slid in China, where
its profit was cut nearly in half, to about $1.1 billion.
GM posted a $194 million loss in the fourth quarter, compared
with $2 billion in net income a year earlier, hurt by non-recurring
items including restructuring costs and the sale of a
commercial-vehicle joint venture in China. Revenue fell 20%, to
$30.8 billion.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
February 05, 2020 11:57 ET (16:57 GMT)
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