CNBC reported out on General Motors’ performance in the fourth quarter of 2017. Thanks to crossover sales, a strong pricing strategy and cost controls, the car manufacturer beat all market earnings targets for the quarter.
General Motors said these results were despite declining wholesale volumes. The car maker had been forced to reduce inventories due to lowered demands. Simultaneously, the company also relaunched its high-margin range of crossover vehicles like the Chevrolet Traverse and Equinox as well as the Buick Enclave and the GMC Terrain. According to Bloomberg, this is the first time since GM declared bankruptcy in 2009 that the company has revamped and relaunched the Chevrolet Equinox and the biggest and more spacious Traverse.
Thanks to the revamps, sales of the compact Equinox jumped by 20% in the US, while the Traverse saw a 5.8% jump. The Cadillac XT5 crossover was a huge success, with sales increasing by 73% in 2017. The Cadillac XT5 is also extremely popular in the Chinese market and this brand is expected to double global profit by 2021.
GM’s adjusted earnings per share were at $1.65 vis-à-vis the market expectation of $1.38. Revenue generated was $37.7 billion while the market target was $36.55 billion. However, the company was lower than its previous revenue in 2016’s 4th quarter which was $39.9 billion.
GM Financial, the company’s in-house financer, is expected to continue growing this year. The division’s profits increased by $400 million to touch $1.2 billion in 2017. GM Financial is expected to finance between 55% and 60% of all GM’s retail sales in the US.
Overall, the company reported a net loss of $4.9 billion, which was a drop from the 4th quarter results of 2016, when GM reported a profit of $2.1 billion. However, this loss was due to one-time tax cut which was due to the newly enacted tax laws. The company took a hit of $7.3 billion. General Motors also took a charge of $6.2 billion due to the sale of its European brands, Opel and Vauxhall.
If these one-time charges were excluded, then company actually made a profit of $3.1 billion, which is an earnings of $1.65 per share. The market expectation was $1.38 per share.
GM Chief Executive Officer, Mary Barra stated that 2017 was a transformative year for the company. The company has been focusing on strengthening its core business while also continuing with its plan to re-shape the company to meet future challenges so that it would be in a position to achieve long-term success.
GM’s spokesperson, Tom Henderson said that the excellent performance of the company in 2017 meant that 50,000 workers were going to get bonuses of $11,750.
General Motors said that it expected 2018 to be a strong year not just in the US but across the whole world. The company relaunched its high margin crossovers in 2017 and is expected to see the results of that move this year. The Cadillac 4T crossover is also due to be launched this year.
General Motors and its Chinese partners also plan to launch 15 GM as well as Chinese brands in 2018. These brands will include Buick, Cadillac, Chevrolet, Baojun and Wuling.
General Motors is also planning to spend $8 billion in capital expenditures, of which $1 billion will be solely dedicated to the development of autonomous or self-driving vehicles. The company, like its biggest US competitor, is focusing on high-margin vehicles like crossovers and SUVs and is increasing its research and development spend to focus on the future.
GM share prices rose by 5% to $41.46 per share.