By Dow Jones Business News,
January 15, 2014, 12:40:00 PM EDT
By Jeff Bennett
General Motors Co. said it would use expected profit gains in the U.S. and China this year to offset restructuring
costs elsewhere, leaving its overall earnings modestly above those of 2013.
The nation's largest auto maker earned $7.62 billion in pretax profit last year, up from $6.12 billion a year
earlier, according to an estimate by FactSet. GM is expected to disclose its fourth-quarter and full year results on
The disclosure sent its shares down in broadly higher stock market. GM dropped 62 cents, or 1.5%, to $39.40 in
recent trading in New York.
"We're taking advantage of strength to really take aggressive and assertive steps to fix other parts of the
business," GM President Dan Ammann said on Wednesday during a presentation to auto industry analysts in Detroit. "We're
committing a large amount of cash and resources to restructure Europe and we are spending money, real money to
restructure some of the international operations that will pay off substantially for us in the future."
GM said it expects to spend about $1.1 billion on restructuring costs, including closing a plant in Germany,
winding down production in Australia and pulling the Chevrolet brand from Europe.
The forecast follows rival Ford Motor Co.'s lackluster forecast for 2014. Dearborn, Mich.-based Ford said last
month that higher expenses due to new vehicle launches this year and a Venezuelan currency devaluation would leave
profit below that of last year.
GM will begin paying 30 cents a share quarterly dividend on its common shares in March after posting a 4% increase
in world-wide sale volume and as big investors pushed for a resumption of cash payouts. The proposed payout will cost GM
nearly $1.67 billion a year.
GM's outlook combined with Ford's forecast underscores the internal pressures the two companies are still wrestling
with despite booming sales in the U.S. and an expected 2% increase in the number of cars and trucks sold globally. More
than 85 million vehicles are expected to be purchased this year.
Mr. Ammann said GM's core operations remain intact and that the money being spent this year was to position the
company for a healthy 2015.
"We have a big opportunity to really be smarter and more thoughtful and more strategic about our resource
allocations," Mr. Ammann said.
In a breakdown of its regional operations, North America is expected to see retail share growth, a modest market
share increase and higher prices for vehicles sold.
"Overall, 2014 will be another important step on our path to 10% pretax profit margins," said GM's newly named
Chief Financial Officer Chuck Stevens.
In Europe, GM is "starting to get some traction" for the first time in 14 years, as it moves its marketing muscle
behind its German Opel brand and pulls Chevrolet from the region. But vehicle pricing will remain an issue as the
region's auto makers offer incentives to drive sales, Mr. Stevens said.
"We're expecting moderate industry recovery, very moderate industry recovery" [in Europe], Mr. Stevens said. "But
at least we're sensing that we've bottomed out and we're starting to go on an upward trajectory."
The company's international operations will be the biggest challenge as the company begins to withdraw from
production in Australia and deal with an overall underperformance.
"There is a number of repair jobs that we need to start working on," Mr. Stevens said. "We need to regain momentum
in 2014 and execute the restructuring actions so that we get the full benefit of that in 2015 and 2016."
South America is expected to report relatively flat performance during the year, as strength in Brazil is offset by
currency fluctuations in Venezuela and Argentina.
"The risk profile in South America has increased significantly in the past several months," Mr. Stevens said. "We
think that is going to continue in 2014. A lot of volatility risk in Venezuela and Argentina. It's very, very difficult
to do business in Venezuela right now. And we're going to have to manage through that as we go through the year."
Write to Jeff Bennett at email@example.com
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