GM Posts Loss on Tax Changes, Logs Strong Demand for Pickups and SUVs--Update

02/06/18 09:05 AM EST
By Mike Colias 

General Motors Co. said its fourth-quarter bottom line swung to a $5.2 billion loss because of a hefty charge related to U.S. tax reforms, but stout demand for pickup trucks and SUVs pushed operating profit to a record for the quarter, surpassing Wall Street forecasts.

GM's net loss for the final three months of 2017 included a $7.3 billion noncash write-down to reflect the loss in value of deferred tax assets held on its balance sheet. Several large companies have reported sizable write-downs in the value of those credits against future taxes, which fell because of the lower corporate tax rate under federal tax overhaul.

The largest U.S. auto maker in terms of sales said fourth-quarter operating profit excluding one-time factors rose 19% to $3.1 billion, or $1.65 per share, easily hurdling the $1.38 average analysts' estimate.

Revenue slipped 5.5% to $37.7 billion, higher than the average analyst forecast of $36.5 billion, bolstered by strong sales of sport utilities in North America.

For the year, GM earned $12.8 billion in operating profit, matching last year's record. That amounted to $6.62 per share, above the $6-$6.50 range GM had forecast.

GM shares slipped less than 1% in premarket trading after falling more than 3% Monday amid the broader stock-market plunge.

GM finance chief Chuck Stevens said the auto maker's optimistic outlook for 2018 hasn't changed despite mounting concerns over inflation that have touched off the recent global selloff in equities.

"We are not overly concerned at this point around some of the discussion around inflation," Mr. Stevens told reporters Tuesday. He said underlying economic conditions in the U.S. -- including historically low interest rates, wage growth and benefits from tax reform -- should support the economy and vehicle sales this year.

Results in China, GM's largest market in terms of sales volume, remained strong as the company offset industrywide price pressure with higher sales of pricier vehicles, including Cadillacs and SUVs. Income from GM's joint ventures in China totaled $504 million in the fourth quarter, down 4% from a year earlier.

GM's finance arm, GM Financial, contributed $301 million in fourth-quarter operating profit, up 85% from a year earlier. For the year it brought in $1.2 billion, the most since GM re-established a captive finance unit following its 2009 bankruptcy.

The company swung to a net loss for the year of $3.9 billion on the tax-related charge and other one-time expenses related to the August sale of its European business to French car maker Peugeot .

GM is benefiting from heightened demand for sport utilities and pickup trucks, which generally reap bigger profits than passenger cars. The trend is especially helping GM, Ford Motor Co. and Fiat-Chrysler Automobiles NV, which sell broader portfolios of trucks and SUVs than Asian rivals.

The richer product mix is a big factor allowing GM to sustain high profit margins even as sales in the key U.S. market edge down after a seven-year growth spurt. Fourth-quarter North American operating profit rose 7%, to $2.9 billion, even as production slid about 15%, according to an estimate from WardsAuto.com.

Under terms of its United Auto Workers contract, GM said it would cut profit-sharing checks later this month of up to $11,750 to about 50,000 U.S. factory workers, based on the operating profit in North America.

Write to Mike Colias at Mike.Colias@wsj.com

 

(END) Dow Jones Newswires

February 06, 2018 09:05 ET (14:05 GMT)

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