General Motors said on Friday that its decision to cut 15 percent of its North American workforce and halt production at several plants could contribute between $2 billion and $2.5 billion to profits this year.
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The stock jumped on the news.
|GM||GENERAL MOTORS COMPANY||38.61||+0.35||+0.91%|
“We will continue to strengthen our core business and invest in the technologies that will transform the future of mobility,” CEO Mary Barra said in a statement. “Managing both well is critical to position General Motors for success for generations to come.”
Ahead of its fourth-quarter earnings announcement, the largest American automaker strengthened its earnings guidance to between $4.5 billion to $6 billion, while it said per share profits could be $6.50 to $7 -- exceeding Wall Street’s $5.86 forecast, according to Refinitiv.
The closures of five GM facilities in Ohio, Michigan, Maryland and Ontario in November came as the Detroit-based company looked to cut costs amid restructuring. It could affect about 15,000 employees. GM will also cease production of several car models, including the Chevrolet Cruze and the Buick LaCrosse.
But in 2019, GM said it plans to focus on investing in technology like lightweight vehicles, more efficient transmissions and electrification. It’s also betting big on pickup trucks this year, said President Mark Reuss during the automaker’s Capital Markets Day presentation for investors Friday in New York.
Part of that will be an emphasis on the Cadillac, which is expected to become the company’s lead electric vehicle brand. It will introduce the company’s battery electric vehicle architecture, which it believes will build a foundation for a profitable EV. It’s unclear when exactly the Cadillac EV will be built, but according to Reuters, the company expects it to eventually compete with Tesla.
“Cadillac will lead us into the future,” Reuss said.
And despite a nearly year-long trade war between the U.S. and China that’s rattled some companies, GM said it’s in a position to “mitigate the headwinds and capitalize on the tailwinds” in Beijing, forecasting 2019 sales in the country to be in line with 2018 levels of about 27 million.
“China is playing a key role in our global strategy,” Reuss said.
While investors celebrated news of GM’s restructuring, lawmakers in the states most heavily affected by the cuts lambasted CEO Mary Barra.
President Trump also lashed out at Barra threatening to cut the company’s subsides, including for electric vehicles. The government hands out federal tax credits worth $7,500 to customers who buy electric vehicles.