GM hopes US and China growth will offset tougher regions image

According to its new executive team a modest growth in the United States and China this year would help General Motors fund about $1.1 billion in restructuring costs in other harder-hit regions, including Europe and Australia.

The new management team led by Chief Executive Officer Mary Barra and President Dan Ammann took the reins on Wednesday, saying the company expects a slight rise in pre-tax profits this year, while margins likely will remain flat until 2015.

China remains GM’s strongest market. The automaker plans to open four new plants there through 2015, increasing annual production capacity to 5 million vehicles, keeping neck and neck with chief rival Volkswagen AG. In comparison, GM built 3.3 million vehicles in North America last year.

“We continue to perform well in the two most important markets in the world, the U.S. and China,” Barra said in a statement. “We’re taking advantage of our strength in these countries to restructure and make the investments necessary to grow profitably in other parts of the world.”

GM plans to launch 17 new or upgraded models this year with joint-venture partners in China, including the Cadillac ATS, Chuck Stevens, who succeeded Ammann as chief financial officer, said at a Deutsche Bank auto analyst conference.

The automaker sold 3.1 million “very profitable” vehicles last year in China, Stevens said, and expects volume to grow again in 2014. Margins likely will remain flat this year, but GM anticipates improved sales and earnings in 2015, he said.

Europe remains something of a problem child for GM. The company cut its losses and boosted revenue there in the second half of 2013. With the withdrawal of the Chevrolet brand in Europe, GM’s Opel subsidiary expects a modest increase in sales volume and market share this year, Stevens said.

But GM Europe’s financial performance could deteriorate further, in part because of currency volatility in Russia and restructuring costs associated with the impending closure of Opel’s Bochum plant in Germany.

Slowing sales growth and higher incentives will put more pressure on U.S. vehicle prices and margins, said Stevens. But he acknowledged “a lot of uncertainty” in the highly profitable full-size truck market, where GM’s Silverado and Sierra will square off later this year against the redesigned Ford F-150.

Via Reuters