GM upbeat about 2019 as it looks to idle plants, cut workers
General Motors Co. is feeling optimistic about the year ahead despite a growing list of uncertainties, forecasting slight financial growth for the year as it readies a new electric-vehicle platform.
GM is forecasting earnings per share between $6.50 and $7 and free cash-flow of up to $6 billion for 2019, as a sweeping restructuring plan executed this year saves the company up to $2.5 billion.
The forecast for this is partially based on GM's expectation that the U.S. vehicle market will remain strong this year — projecting sales in the low 17-million range — as the automaker expects strong truck and SUV sales to offset a variety of costs, including autonomous vehicle programs and a new electric vehicle structure, rising commodity costs, and costs related to restructuring efforts.
GM gave its financial guidance for 2019 at its Capital Markets Day event with investors Friday in New York, bypassing the annual forecast at the Deutsche Bank Global Auto Industry Conference traditionally held during the Detroit auto show's press week, beginning this year on Monday.
The Detroit automaker is also adjusting its financial guidance for 2018, expecting now to end the year with earnings per share slightly higher than the $5.80 to $6.20 range initially forecast, while also exceeding the previously estimated $4 billion in free cash flow. GM did not specify its updated free cash-flow projection.
"GM is transforming," CEO Mary Barra said during a press conference prior to the Capital Markets Day presentation. Barra said the company's plans to strengthen the core business are necessary to take a leadership position in the future of the automotive business.
"We believe that we, as General Motors, can lead this transformation and really define the next generation of how people will move from point A to point B," she said.
Cadillac will lead GM's electric vehicle push in 2019, the start of the automaker's march to 20 EVs by 2023. The luxury brand is expected to introduce a new model this year based on GM's new electric vehicle architecture. The new and more flexible EV platform will accommodate a variety of body styles and will be offered in front-, rear- and all-wheel drive configurations, GM said Friday.
The new electric vehicle platform will be exclusive to Cadillac when it launches in 2021, GM President Mark Reuss said.
GM has been slowly restructuring its leadership to ready for this pivot, promoting former electric-vehicle development chief Pamela Fletcher to the senior leadership team in September and elevating former global product chief Reuss to president of GM earlier this year. The Cadillac brand also moved under Reuss' supervision last year when the brand ditched New York for Warren.
GM's rosy outlook for 2019 bucks analyst expectations that the Detroit automaker would forecast a more challenging year, which would have set an uneasy tone for the North American International Auto Show next week. The positive forecast comes as the company navigates a sweeping restructuring that could see up to five North American plants closed and upwards of 6,000 white-collar workers laid off.
On the Monday after Thanksgiving, GM announced a plan for 2019 that would include cutting 15 percent of its white collar staff — some 8,000 workers — and reconsider the viability of five manufacturing facilities in North America, affecting some 6,300 blue-collar employees in the U.S. and Canada.
Detroit-Hamtramck Assembly, Warren Transmission, Baltimore Operations and Lordstown Assembly in Northeastern Ohio will all cease production by Aug. 1, while Oshawa Assembly in Ontario will shutter in the fourth quarter. Union officials in the U.S. and Canada have blasted GM for investing in its Mexican manufacturing facilities as it shutters the union-represented shops.
United Auto Workers vice president and head of the GM department Terry Dittes reacted to the Detroit automaker's plans for Cadillac's new electric vehicle by encouraging GM to build it in the U.S.
"General Motors builds some of the finest cars, trucks, crossovers, SUVs and vans right here in the USA," Dittes said in a Friday statement. "We are hopeful that these new products will be built here to show a commitment to all of America. We invested in GM. Now it is time for GM to invest its future in us."
GM announced late last year that it had job opportunities for 2,700 of the 2,800 UAW-represented workers affected by the closings of Detroit-Hamtramck, Warren Transmission, Baltimore Operations and Lordstown Assembly. Barra said Friday that 1,500 workers in those facilities have already volunteered for transfer and about 700 are en route to new jobs at Flint Assembly and Spring Hill Manufacturing in Tennessee.
When production stops at those plants this year, the slow-selling products they build will be cut from the U.S. lineup. Those vehicles are the Buick LaCrosse, Cadillac CT6 and XTS, and Chevrolet Volt, Cruze and Impala.
Reuss appeared to walk back the demise of the CT6, saying that reports it will go away when production ends at Detroit-Hamtramck later this year are "speculatory." Reuss said Cadillac will still need a flagship like the CT6 to compete with European luxury automakers.
As GM leans into electric vehicles in 2019, the emission-free cars are also the underpinning of GM's plans for a driverless taxi fleet. GM's autonomous test vehicle, the Cruise AV, is based on the battery-electric Chevrolet Bolt EV.
Nearly a year ago, GM filed a petition with the National Highway Traffic Safety Administration to deploy a self-driving fleet of electric vehicles — sans steering wheel and brake pedal — on public roads in 2019.
The automaker and its autonomous vehicle development arm GM Cruise LLC have been largely quiet about the progress of that project since the announcement ahead of last year's Detroit auto show, but GM said in its statement Friday that the project is still on track for this year. Barra said GM's investments in autonomous vehicles in 2019 will likely match the expected $1 billion investment in the program in 2018.
In the meantime, GM Cruise has attracted billions of dollars in investments, including $2.25 billion from Japanese investment firm SoftBank Investment Advisers and $2.75 billion from Honda Motor Co. as part of an alliance on future autonomous vehicle development.
Globally, GM says it will launch an all-new portfolio of vehicles first for China in 2019 and then for South America and Mexico. GM says it has lowered its breakeven point in South America by 40 percent.
Despite some contraction in the Chinese market at the end of 2018, GM says it is still positioned for "long-term growth." The automaker says it will launch more than 20 all-new or refreshed vehicles in China in 2019, including compact cars, crossovers and "new-energy" vehicles.
GM CFO Dhivya Suryadevara said the company expects "a moderate decline in equity income year over year" in China, and while GM is seeing recovery in South America "the effects are unknown."
Barra hinted repeatedly that GM is considering exiting South America. Brazil and Argentina, GM's largest South American markets, continue to prove challenging, she said. The company is working with "key stakeholders" in the region to take all necessary actions to either improve the business "or consider other options."
Said Barra: "We are not going to keep deploying capital to lose money."