General Motors said Tuesday it expects to post another record profit for 2017 but earnings will be flat this year due to the costs of launching a new truck range and a likely decline in U.S. sales.
Previewing its 2017 results, the automaker forecast that adjusted earnings will hit the higher end of expectations at $6 to $6.50 per share — a record for GM. The figure excludes a one-time writedown of $7 billion of deferred tax assets related to the U.S. new tax law that lowers the corporate tax rate from 35% to 21%.
For this year, however, GM predicts earnings will be “largely in line” with expected 2017 results, which would bring the profit growth streak to an end. Analysts have forecast 2017 earnings per share of $6.30 and $5.98 a share in 2018.
According to CFO Chuck Stevens, GM faces challenges in 2018 from the costs of launching the new large pickup trucks, rising interest rates in the United States, and the likely decline in overall U.S. vehicle sales.
“The company and its Detroit rivals, Ford Motor Co. and Fiat Chrysler Automobiles, are bringing on new trucks at a time when overall U.S. new vehicle sales have been falling, but truck sales continue to grow as consumers abandon passenger cars in favor of pickups, SUVs and crossovers,” Reuters reported.
The high-margin, next-generation trucks are expected to lift earnings back to growth in 2019.
“GM executives admit the company hasn’t maximized its profit opportunity from [the truck] business because it has focused mostly on the middle of the market, selling trucks priced $35,000 to $55,000,” Forbes said. “By widening its lineup to include not only entry-level trucks but also more luxurious models like the GMC Denali trim level, it expects to accelerate its truck profits.”
GM plans to invest approximately $1 billion annually, up from $600 million in 2017, in future autonomous vehicles, but executives aren’t saying yet when they expect that business to be profitable.
“In the meantime, it’s clear pickup trucks will continue pumping out plenty of cash to fund GM’s future ambitions,” Forbes said.