GM Chairman and CEO Mary Barra appears to be on track for another solid year as the company re-affirmed its financial guidance for the 2016.
General Motors Co. re-affirmed its earlier forecast, calling for the company to make up to $6 per share and said it expects to exceed its cost-savings target of $5.5 billion, which will be more than enough to offset increased spending on new technology and ride-sharing.
The optimistic outlook was in sharp contrast from its crosstown rival Ford Motor Co., which reduced its profit forecast for the second half. Ford expects slower sales as well as higher costs for incentives and the launch of new vehicles and other initiatives.
GM also released a new report aimed providing additional insights about the company for the investment community.
GM’s “Strategic and Operational Overview includes a review of the company’s continuing efforts to trim costs even as it keeps pace with the unfolding revolution in automotive technology and makes a concerted effort to win “customers for life.”
(Ford slashes 3Q profit outlook. For more, Click Here.)
The company said noted during the first half of 2016 alone, it had cut costs by $3.1 billion “more than offsetting incremental investments” technology, including the more than $1 billion spent on ride-sharing and vehicle automation, which are expected to define the global automotive industry in the years to come.
GM expects to cut another $2.4 billion in costs over by 2018, raising the total savings to more than $5.5 billion, which was more than enough to offset any increase in capital spending.
In the strategic overview released this week, GM also said that it can make money even if U.S. auto sales fall about 40% from the current level 17.3 million units to between 10 million and 11 million units, which was the target for profitability that was fixed by the Obama Administration’s Automotive Task Force as GM emerged from bankruptcy in 2009.
(Click Here to see more about the deal between GM and Canadian auto workers.)
Investors have come increasingly concerned about the ability of automakers to sustain their profitability when sales of new vehicles begin to slide given the industry’s cyclical nature and recent history.
The report noted that GM has a strong grip on the new technology and on emerging markets in China and in other parts of the world where car sales promise to grow in the future.
Ford slashed by $600 million its projected pre-tax profits for this year, to $10.2 billion, as a result of an expanded recall covering vehicles whose doors could unexpectedly fly open while moving. The make last week added another 1.5 million vehicles to that recall, bringing the total number of models affected to 2.4 million.
(To see more about GM’s commitment to 100% renewable energy use at plants by 2050, Click Here.)
The company also noted earlier this month that the rollout of its new F-Series Super Duty would cut into its second-half profitability.