Incoming General Motors CEO Mary Barra and departing General Motors CEO Dan Akerson at the North American International Auto Show in Detroit on Tuesday. (David Coates / The Detroit News)
General Motors Co. said Wednesday that it expects its earnings before interest and taxes to be “modestly improved” in 2014 as it betters its operating performance, even with increased restructuring costs.
GM President Dan Ammann, speaking at the Deutsche Bank 2014 Global Auto Industry Conference, said GM’s adjusted margins this year will be similar to 2013 and that overall market share would remain “flat to slightly up.”
The automaker said it will launch 15 new or upgraded models this year in the U.S. after launching 18 vehicles last year; and in China, the company and its joint venture partners will launch 17 new or upgraded models this year.
GM said it also plans to open four additional plants in China through 2015, allowing it to produce up to 5 million units annually. China is GM’s largest sales market and newly named GM Chief Financial Officer Chuck Stevens said he expects margin growth in China in 2015 and 2016 when GM is selling more SUVs and Cadillacs in the region.
“We continue to perform well in the two most important markets in the world: the U.S. and China,” GM CEO Mary Barra said in a statement. “We’re taking advantage of our strength in these countries to restructure and make the investments necessary to grow profitably in other parts of the world.”
Ammann also warned that it expects first quarter earnings will be softer than typical before rising later in the year, mainly due to the timing of restructuring, and launch costs associated with updated heavy-duty pickups and new full-size SUVs, plus issues in South America operations.
“Things are very volatile in South America right now, particularly in Venezuela...,” Ammann said. “We have some real challenges just operating in some of those places down there right now, and we do expect some impact from that to fall into the first quarter.”
GM predicts sales for the U.S. industry to hit 16 to 16.5 million this year and that it will book a “modest” market share increase here in 2014.
GM expects restructuring costs to total about $1.1 billion in 2014, a figure Ammann told reporters on a call Wednesday he expects will drop significantly in 2015. Ammann said restructuring costsin 2014 include expenses for closing GM’s Bochum plant in Germany, phasing out the sales of most Chevrolets in Europe as well as some costs to restructure Australian operations as it plans to end manufacturing vehicles there. Ammann said some restructuring costs also will occur in South America.
“The execution of those restructuring activities in (International Operations) and Europe clearly impact earnings this year ... but they will set us up for a much stronger result going into (20)15,” Ammann said.
Ammann called 2014 a “transition year” for Europeand GM expects to gain share in the region this year. Stevens said performance should improve in 2015. GM, which has lost billions in Europe since 1999 and has lost $499 million in Europe through the first nine months of 2013, Wednesday reaffirmed its expectation to break even in the region by mid decade. Stevens said the company must solve challenges in Russia.
GM’s International Operations also are expected to see lower earnings and margin due to restructuring in 2014 compared to 2013.
“There’s a number of repair jobs that we need to start working on in the rest of Consolidated Operations,” Stevens said.
Stevens said GM expects to boost its retail share in North Americathis year and said 2014 is another “important step on our path to 10 percent” margins before interest and taxes in North America by mid-decade. Stevens said he expects continued improvement in margins and core operations this year in North America.
Joseph Spak, an analyst with RBC Capital Markets, said Wednesday in an investment note that GM’s guidance was somewhat disappointing. Shareholders seemed to agree, with GM’s stock down about 2.5 percent around 10:55 a.m. to about $39 a share.
“We think this set up could create a good entry point and better frames for GM heading into the rest of the year,” Spak wrote, “The guidance also gives the new management team a little more wiggle room to deal with in their first year. Further, yesterday’s better than expected dividend announcement should add a little support.”
The automaker said it plans to spend about $7.5 billion on capital expenditures in 2014. It also expects to spend about $700 million to acquire Ally Financial’s operations in China by the end of the year, about $3.9 billion to redeem certain shares of stock and $1.8 billion on a new quarterly dividend announced Tuesday.
“My responsibility and the responsibility of the whole leadership team and this company is to deliver results,” Ammann said. “That is the mode we are in now. It is all about execution and it’s about taking all the work that’s been done and turning it into results at the bottom line.”
GM will announce fourth quarter and full 2013 earnings results on Feb. 6.