GM affirms profit and cost cutting targets
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The GM logo is seen in Warren, Michigan, U.S. on October 26, 2015. REUTERS/Rebecca Cook/File Photo
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By Bernie Woodall and Paul Lienert
DETROIT (Reuters) - General Motors Co (NYSE: GM) on Wednesday affirmed its forecast for 2016 profit of up to $6.00 per share and said it expected to exceed its cost-savings target of $5.5 billion by 2018 as the automaker unveiled a new effort to convince investors of its value.
GM said it cut costs through the middle of this year by $3.1 billion since the start of 2015, "more than offsetting incremental investments" in engineering and technology, including more than $1 billion spent on ride-sharing and vehicle automation. It expects to achieve another $2.4 billion or more in savings by 2018.
In a new Strategic and Operational Overview released on Wednesday, GM said that it can make money if U.S. auto sales fall about 40 percent from today's levels -- an estimated 17.3 million in 2016 -- to about 10.5 million.
GM has been making record profits in the past year, but its stock price has suffered as Wall Street analysts say that a coming downturn in U.S. auto sales will pressure GM's shares, along with that of crosstown rival Ford Motor Co (NYSE: F).
Ford briefed investors on its plans a week ago.
GM shares were up 1.1 percent to $32.01 in mid-morning trade. Ford was up 0.7 percent to $12.09.
Both GM and Ford, while among the largest automakers globally, still make about 90 percent of their profit in North America, where they lead the industry in making full-size pickup trucks and SUVs.
GM affirmed its target of 9 percent to 10 percent margins on its global auto business "by early next decade" and said it expects to return excess free cash to shareholders. The automaker earlier boosted its share repurchase program.
While stretching out the life of some of its products, GM said it will continue an aggressive launch schedule in China, where it continues to realize substantial profits and plans to introduce more than 60 new or refreshed models by 2020.
Although GM recently scaled back India's involvement in its multibillion-dollar GEM small-car program, the automaker said it would launch five new models in that country in the next 24 months.
GM said Brexit could threaten its profitability in Europe, but said it still plans to unveil 29 new models there by 2020.
(This version of the story refiles to correct $3.1 billion cost savings since start of 2015, not start of this year in the second paragraph)
(Reporting by Bernie Woodall and Paul Lienert in Detroit; Editing by Lisa Von Ahn and Phil Berlowitz)
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