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DETROIT: General Motors Co (GM) on Tuesday (Jan 31) reported higher net income for the fourth quarter, forecast stronger-than-expected earnings for 2023 and said it would cut US$2 billion (RM8.52 billion) in costs.

The automaker, the top in the United States by sales, forecast that it could hold its pre-tax margins steady between 8% and 10% through 2025, despite a price war that Tesla Inc has triggered in the electric vehicle segment.

GM plans to build only about 400,000 electric vehicles in North America between now and the first half of 2024. Its financial results will hinge mainly on sales of combustion-engine trucks and SUVs.

GM chief executive Mary Barra said she does not see a need to cut prices on GM’s electric vehicles in response to Tesla. “Right now based on the interest we’re seeing, the pricing we put out was very appropriate,“ Barra told analysts during a call on Tuesday.

For now and for several years to come, GM’s profitability will be driven by demand for those vehicles – a reality GM highlighted in its presentation to investors. GM underscored that its Chevrolet and GMC pickup trucks make it No. 1 in sales volume in the US market, and it leads in sales of highly profitable large SUVs as well.

GM’s outlook “sets a high bar for this year”, Morgan Stanley analyst Adam Jonas wrote in a note. He said GM expects to boost revenue over a period when other legacy automakers’ revenues could shrink.

“We question whether the company will be able to self-fund such spending plans in a higher rate, slower growth environment,” Jonas wrote.

The company plans to cut costs in automotive operations by US$2 billion this year and next year, including reducing employment through attrition, CFO Paul Jacobson told reporters on a call on Tuesday, but does not plan layoffs. Big technology firms including Amazon, Google and Microsoft have rattled markets by announcing thousands of job cuts.

GM has 167,000 employees worldwide, including its financial subsidiary and the Cruise robotaxi unit.

Jacobson said the US vehicle market remained robust, and the automaker forecast US car and light truck sales will rise in 2023 to 15 million vehicles from 13.9 million last year.

Jacobson expressed little concern about the potential impact of recent price cuts by Tesla and Ford Motor Co on popular electric vehicle models.

“We see incredibly strong demand with the pricing strategy we’ve gone to market with,” he said.

EV price cuts shouldn’t affect pricing for GM’s combustion vehicles, he said.

GM expects consistent strength in its core auto operations in 2023, with full-year operating earnings in the range of US$10.5 billion to US$12.5 billion, or US$6.00-US$7.00 a share. Analysts had expected US$5.73 a share, according to Refinitiv IBES data.

For 2022, GM’s operating profit reached a record US$14.5 billion.

In the fourth quarter, GM earned US$2 billion, up from US$1.7 billion the previous year, as higher prices and increased sales volume in North America more than offset higher costs.

Operating earnings per share of US$2.12 in the quarter compared with US$1.99 a year earlier. Analysts had predicted $1.69.

GM’s average vehicle selling price in North America hit a record US$51,000 in 2022, as the company focused production on more expensive, higher-margin vehicles.

GM said capital spending will range between US$11 billion and US$13 billion in 2023, up from US$9 billion in 2022.

Ahead of the earnings release, the automaker said it would invest US$650 million in Lithium Americas and jointly develop a lithium mine in Nevada that it says is the largest known source of the key battery material in the United States.

The company expects revenue from electric vehicles to reach US$50 billion in 2025 – about 22% of total revenue – with pre-tax margins in the low to mid-single digits.

Cruise lost US$1.9 billion in 2022, and GM expects losses to increase as the unit expands to more cities in 2023. – Reuters

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