A new management team led by Chief Executive Officer Mary Barra and
President Dan Ammann took the reins Wednesday, saying the company
expects a slight uptick in pretax profits this year, while margins
likely will remain flat until 2015.
China remains GM's strongest market. The automaker plans to open
four new plants there through 2015, increasing annual production
capacity to 5 million vehicles, keeping neck and neck with chief
rival Volkswagen AG <VOWG_p.DE>. In comparison, GM built 3.3 million
vehicles in North America last year.
"We continue to perform well in the two most important markets in
the world, the U.S. and China," 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."
GM plans to launch 17 new or upgraded models this year with
joint-venture partners in China, including the Cadillac ATS, Chuck
Stevens, who succeeded Ammann as chief financial officer, said at a
Deutsche Bank auto analyst conference.
The automaker sold 3.1 million "very profitable" vehicles last year
in China, Stevens said, and expects volume to grow again in 2014.
Margins likely will remain flat this year, but GM anticipates
improved sales and earnings in 2015, he said.
Growth in China will be driven in part by a push to boost the
Cadillac brand. GM expects Cadillac sales there to double over the
next two years, to 100,000 in 2015.
Europe remains something of a problem child for GM. The company cut
its losses and boosted revenue there in the second half of 2013.
With the withdrawal of the Chevrolet brand in Europe, GM's Opel
subsidiary expects a modest increase in sales volume and market
share this year, Stevens said.
But GM Europe's financial performance could deteriorate further, in
part because of currency volatility in Russia and restructuring
costs associated with the impending closure of Opel's Bochum plant
Ammann described 2014 as a "transition year" in Europe, where Opel
will introduce a redesigned Corsa subcompact late in the year. A
redesigned Astra compact is expected to follow in early 2015, along
with new families of gasoline and diesel engines, helping to drive
GM's European operations back to breakeven, Stevens said.
Barra and Ammann are taking over a company that has undergone
dramatic changes in recent months, including the exit of the U.S.
government as a shareholder and the restoration of a dividend on
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Ammann said GM expects pre-tax earnings in the first quarter to be
lower than normal because of restructuring expenses and the launch
of new U.S. models, including heavy-duty versions of the Chevrolet
Silverado and GMC Sierra pickups and redesigned full-size SUVs at
Chevy, GMC and Cadillac.
GM expects capital expenditure of $7.5 billion in 2014, and said it
will spend about $3.9 billion to redeem its remaining Series A
shares. In addition, the newly restored common dividend will return
about $1.8 billion to shareholders.
The automaker is "on path" to achieve pre-tax margins of 10 percent
or better by 2015, Stevens said, despite ongoing risks in North
America and some international operations.
Slowing sales growth and higher incentives will put more pressure on
U.S. vehicle prices and margins, Stevens said, who acknowledged "a
lot of uncertainty" in the highly profitable full-size truck market,
where GM's Silverado and Sierra will square off later this year
against the redesigned Ford <F.N> F-150.
GM's South American operations had their second straight profitable
year in 2013, but continued volatility in Venezuela and Argentina
present financial risk, Stevens said.
"Brazil is the market that matters most" in South America, he said.
GM in the past year has launched three new small cars in Brazil,
including the Prisma, the Onix and the Tracker, and will add a
fourth this year — a small crossover called Spin.
GM expects to maintain its current market share in the region, while
increasing pre-tax profit and margins, Stevens said.
The company said higher restructuring costs in 2014 will include the
closing of manufacturing operations at its Holden subsidiary in
Australia. Ammann said most of GM's heavy restructuring costs "are
behind us" and that those charges should drop significantly in 2015.
GM shares were down, at $39.60, in early trading.
(Reporting by Paul Lienert in Detroit;
editing by Sofina Mirza-Reid and Rosalind Russell)
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