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GM Breaks From Gloom With Surprise Forecast for Profit Gain

Bloomberg

Forget about doom and gloom: General Motors Co. said that it will grow profit in 2019 even as global auto sales level off and investors have been expecting a tough year. Shares jumped the most intraday in almost three months.

The Detroit-based automaker projected 2019 adjusted earnings will rise to between $6.50 and $7 a share, easily exceeding analysts’ $5.92-a-share average estimate. GM also said it will exceed the high end of its profit forecast for last year, which was $6.20 a share.

Key Insights

GM said its recent round of cost cuts, rollout of new higher-margin trucks and sport utility vehicles and expectation for steady U.S. auto demand will fuel results that analysts didn’t expect to improve. Volkswagen AG, BMW AG and Daimler AG have sounded more downbeat. The rosy outlook will be cold comfort to many salaried employees who will find out this month if they’re being dismissed as part of restructuring moves announced late last year. But GM said that of the 2,800 hourly employees impacted by plans to stop allocating to four U.S. plants, all but roughly 100 will be provided positions. The cost-cutting moves announced in November will help 2019 earnings by $2 billion to $2.5 billion, Chief Financial Officer Dhivya Suryadevara told reporters in a briefing Friday. GM said the restructuring will help profits by a total of $6 billion by 2020. GM sees U.S. auto industry sales holding up this year in the low-17 million unit range, a more optimistic view than many analysts have for 2019. Carmakers sold about 17.3 million vehicles last year. In China, GM expects retail sales to be in line with almost 27 million vehicles last year, but its profit in the region will be down slightly.

Market Reaction

GM shares surged as much as 8.7 percent to $37.75 as of 9:45 a.m. in New York. The stock is the biggest gainer in the S&P 500 on Friday and is bouncing back some from last year’s 18 percent plunge.

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GM also affirmed that Cadillac will be the first to sell an electric vehicle using GM’s all-new battery platform. Read GM’s statement