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General Motors expects to deliver stronger than expected earnings for the final months of 2018 and all of 2019, in part by rationalizing its products and production capacity, Chief Executive Officer Mary Barra will tell Wall Street analysts and investors during a meeting at the New York Stock Exchange today.
Barra and her top management team are planning to deliver a generally upbeat view of the industry, overall, with GM planners anticipating another good year of sales in the U.S. new car market, as well as a rebound in China after the world’s largest auto market’s unexpected slowdown in 2018.
Barra is expected to defend the decision to close three assembly plants and drop six sedan models in a bid to adapt to changing market conditions. The move, along with sharp cuts in GM’s white-collar workforce will eliminate nearly 15,000 jobs this year. But Barra stressed it was necessary to move from “a position of strength,” rather than wait for an economic downturn, during a conference call with reporters ahead of the Wall Street meeting.
Under Barra, who took on the CEO job in 2014, GM has made a number of cutbacks, both in the U.S. and abroad, pulling out of unprofitable markets like Russia and South Africa and selling off its struggling European operations. With other manufacturers — notably Ford — also retrenching, there have been concerns GM might not be done in the U.S.
But Barra ruled that out Friday morning, saying that, “What we have in plans for 2019 we have already announced,” adding that “based on current business conditions… there’s nothing more that hasn’t been announced.”
Nothing in terms of new plant closings, anyway. But analysts have been wondering where GM will go from a product perspective. The automaker won’t go as far as rival Ford, all but abandoning passenger cars, but it is sharply paring back on sedans and coupes while expanding its light truck options.
GM also is preparing to make a big push into autonomous and electrified vehicles. Barra said Friday that an all-new family of battery-electric vehicles will begin rolling out, with luxury brand Cadillac getting the first model. GM’s new president and product czar Mark Reuss said it will be loaded with pretty much every form of technology GM has, including its semi-autonomous Super Cruise.
Eventually, the new platform underlying that Caddy EV will be used for a wide range of products sold by all four of GM’s U.S. brands, along with models marketed in China, now the world’s largest market for electric vehicles.
Barra has said on several occasions that her goal is to shift entirely to battery power, and the new “architecture” that will be used for the Cadillac electric vehicle should help GM take a more aggressive stand against upstart EV maker Tesla.
As for autonomous vehicles, former GM President Dan Ammann, now the head of AV subsidiary Cruise Automation, hinted that the automaker is moving fast. The Cruise subsidiary has made “a lot of improvements in its self-driving technology,” and appears to be getting ready to launch a new self-driving ride-sharing service that could challenge the one introduced late last year by Google spin-off Waymo.
Ammann said Cruise will take the “appropriate steps” to ensure safety, which might mean using back-up human drivers, but it “could” opt to go with completely driverless products, as well.
The cuts announced last November, along with other moves, should help eliminate as much as $2.5 billion in costs, about half of that through the end of 2019, said Dhivya Suryadevara, GM’s chief financial officer.
Even before the payoff from those cutbacks kick in, GM’s financial situation has been on the ascent, Barra and her team took pains to point out, with the CEO planning to tell Wall Street analysts that the automaker’s earnings will exceed what had seemed like optimistic projections when made last autumn. While Barra wouldn’t discuss hard numbers, GM now expects to top its $5.80 to $6.20 earnings per share guidance for all of 2018. And it expects to top the $4 billion in free cash flow when it delivers its full-year results next month.
Looking forward to 2019, Barra is projecting earnings will run between $6.50 and $7.00 per share, with the consensus analyst forecast at $5.90. Free cash flow, meanwhile, should run anywhere from $4.5 billion to $6 billion.