General Motors 2019 Prospects Lessen After Worries of Profits
Recently, General Motors Co posted a stronger-than-expected quarterly profit on strong U.S. demand. This is for its profitable pickup trucks and SUVs, offsetting the US$3-billion hit from a U.S. labor strike.
However, it made the decision to slash its earnings forecast.
Wall Street analysts have observed the strike costs as a tradeoff for three U.S. plant closures. In addition, they have agreed with a union to boost GM’s profitability.
Meanwhile, in midday trading, shares in GM were up 4.3per cent.
In a news report, Chief Financial Officer Dhivya Suryadevara at GM’s headquarters stated, “The underlying business was strong this quarter,” describing the strike as a “one-time impact.”
Last Friday, the 48,000 United Auto Workers union members at GM approved a new four-year labor deal.
The agreement is with the Detroit firm, ending a 40-day strike.
In a research note, RBC Capital Markets analyst Joseph Spak termed the deal’s financial impact “manageable.”
Third-Quarter Sales Increase
The Detroit-based automaker reported a six percent upsurge in third-quarter U.S. sales. Its increase was led by its highly profitable full-size pickup trucks, SUVs, and crossovers.
This equipment helped its race to a substantial profit margin of almost eleven percent in North America.
Co-portfolio manager at Levin Easterly Partners, Chris Susanin, said, “Frankly, I’m as emboldened as ever,” which maintained more than 4 million GM shares at the end of June.
He also added, “I don’t see why this stock isn’t north of US$100 (a share) in a couple of years.”
All of the pre-tax profits came from its North American businesses and its captive finance arm.
The decline was the fifth straight quarterly sales fall for GM in China.
GM also cut its anticipated 2019 capital expenditures to around US$7.5 billion from its past outlook of US$8 billion to US$9 billion.
On the flip side, Suryadevara stated no strategies were cut, and the lower spend was due to functional efficiencies.
GM will provide more comprehensive forecasts for 2020 early next year.
However, Suryadevara indicated that one predictable 2020 challenge would likely lower U.S. industry sales.
