GM sees improved profit in 2015 on China, U.S. growth

January 15
3:28 AM 2015

General Motors Co (GM.N) on Wednesday forecast its 2015 operating profit will increase from last year due mostly to growth in its two largest auto markets, China and the United States.

As it moves past a year marred by massive recalls from a defective ignition switch linked to at least 45 deaths, GM said modest growth in global vehicle sales this year would help the largest U.S. automaker post improved results in all of its regions. It provided no specific figures.

GM also said it remained on track for 2016 targets, including 10 percent profit margins in North America and a return to profitability in Europe.

Last year, Mary Barra's first as chief executive of the Detroit company, GM dealt with the recall of 2.6 million cars due to the faulty switch that led to numerous probes and lawsuits, as well as an overall increase in total recalls from other problems.

Barra called 2014 "a pivotal year" that GM wants to build on in 2015.

GM also affirmed its plan to achieve profit margins of 9 to 10 percent by early next decade, compared with a consolidated margin of 6.4 percent in last year's third quarter, excluding the impact of recalls. GM plans to boost its capital spending plans this year by 20 percent to about $9 billion. More than one-quarter of the vehicles GM sells next year will come from new and refreshed designs, rising to almost half in 2019.

GM sees global industry sales rising about 3 percent to 89 million vehicles this year, but heightened competition will allow only moderate increases in its vehicle pricing.

GM said Wednesday its worldwide vehicle sales rose 2 percent in 2014 to 9.9 million cars and light trucks, beating the company's previous record set in 2013.

Chief Financial Officer Chuck Stevens said GM will not have to add to the $2.7 billion in charges from recalls through the first nine months of last year plus the $400 million to $600 million to establish a compensation fund related to the bad switch. He did not say whether any recall-related charges would be taken in the fourth quarter. Results will be announced on Feb. 4.

In its core U.S. market, GM sees flat market share, flat to slightly lower vehicle pricing and higher profit margins. It sees improved profit and market share in China even as the growth in that market slows and GM's vehicle pricing declines.

GM still expects its European operations to return to profitability in 2016 for the first time since 1999 as well as increased market share and improved pricing on its vehicles in the region this year.

GM shares ended 2.7 percent lower at $34.30 on Wednesday, amid a broad selloff by investors worried about weak economic growth.

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