DETROIT — General Motors on Wednesday swung to a quarterly profit thanks to high-margin pickup trucks and crossovers in the U.S. market plus cost cutting and maintained its full-year 2019 earnings forecast, lifting its shares 1.7 percent.
All of the No. 1 U.S. automaker's profit came from North America, where those lucrative models helped overcome an overall drop in the number of vehicles it sold. The company's operations in China and South America combined added nothing to the company's bottom line in the quarter.
The stronger-than-expected fourth-quarter profit, driven by strong U.S. results, stood in contrast to the job cuts GM has begun to make in its salaried and hourly workforces.
The automaker said on Tuesday it would add 1,000 workers at its Flint, Michigan, plant to build heavy-duty pickups, giving priority to those laid off at other plants. That announcement came the day after some 4,000 white-collar workers started receiving layoff notices.
The Detroit automaker has received political blowback, including from U.S. President Donald Trump, after announcing in late November it would not allocate new product to five plants in North America that mostly produce less-popular sedan models, indicating they will likely close.
GM Chief Executive Mary Barra has made it clear that, despite the criticism, the cutbacks are necessary for the automaker's long-term financial stability and to pay for the development of electric and self-driving vehicles.
"We can't run at a 70 percent utilization," Barra said Wednesday about the company's plant usage rate. "We had to improve that ... It's a transition we have to go through." An industry rule of thumb is that automakers' lose money when plants operate below 80 percent capacity.
Barra cited the company's efforts to shift many of the affected hourly workers to other plants, lessening the impact of the cuts among blue-collar workers.
It said then it would take pre-tax charges of $3 billion to $3.8 billion to pay for the cutbacks, but expected the actions to improve annual free cash flow by $6 billion by the end of 2020. GM has said commodity and trade costs would hurt 2019 results by $1 billion.
GM said on Wednesday that China's $300 million in operating earnings in the fourth quarter was offset by other international markets. It sold fewer vehicles in China, its largest market by volume, and said weak currencies in South America had also impacted results.
"Our outlook for China overall is for the auto industry to be flat year over year," Chief Financial Officer Dhivya Suryadevara told reporters. "If you take a look at some of these economic indicators coming out of China, there are early signs of stabilization."
Buckingham Research analyst Joseph Amaturo said in a research note he remains concerned longer-term about vehicle pricing in China and North America, as well as demand in China. If China slumps, GM would be challenged to hit its financial targets, he said.
Late last month, rival Ford posted a lower fourth-quarter profit as losses in every region except North America weighed on results.
Earlier Wednesday, Toyota Motor Corp said demand for its bread-and-butter car models from cost-conscious Chinese buyers helped offset weak North American sales of its marquee sedan models such as the Corolla and Camry.
Toyota's fiscal third-quarter profit plunged to 180.9 billion yen ($12.6 billion), about a fifth of what the Japanese automaker earned the previous year, despite relatively solid sales, the Japanese automaker said Wednesday.
U.S. new vehicle sales are expected to drop in 2019 due to rising interest rates and competition from a surfeit of cheaper, nearly-new used vehicles on the market.
On Wednesday, GM reported fourth-quarter net income of $2.1 billion, or $1.40 per share, versus a loss of $5.2 billion, or $3.65 per share, a year earlier. Excluding one-time items, it earned $1.43, above the $1.22 analysts polled by Refinitiv IBES had expected.
It reported a fourth-quarter loss in 2017 to adjust for an overhaul of the U.S. tax system. Excluding those charges, the automaker had reported net income of $2.4 billion.
The company maintained its full-year 2019 adjusted earnings forecast of between $6.50 and $7 per share.
Reporting by Nick Carey and Ben Klayman
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