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DETROIT (Reuters) -General Motors Co shares jumped early on Tuesday after it reported higher net income for the fourth quarter, forecast stronger-than-expected earnings for 2023 and said it would cut $2 billion in costs.
The automaker, the top in the U.S. by sales, forecast that it could hold its pre-tax margins steady between 8% and 10% through 2025, despite a price war that Tesla (NASDAQ:TSLA) Inc has triggered in the electric vehicle segment.
GM plans to build only about 400,000 electric vehicles in North America between now and the first half of 2024. Its financial results will hinge mainly on sales of combustion-engine trucks and SUVs.
Demand for those trucks and SUVs remains strong, Chief Financial Officer Paul Jacobson told reporters on a call on Tuesday.
The company plans to cut costs in automotive operations by $2 billion this year, including reducing employment through attrition. GM does not plan layoffs, Jacobson said. Big technology firms including Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) have rattled markets by announcing thousands of job cuts.
GM has 167,000 employees worldwide, including its financial subsidiary and the Cruise robotaxi unit.
Jacobson said the U.S. vehicle market remained robust, and the automaker forecast U.S. car and light truck sales will rise in 2023 to 15 million vehicles from 13.9 million last year.
Jacobson expressed little concern about the potential impact of recent price cuts by Tesla and Ford Motor (NYSE:F) Co on popular electric vehicle models.
“We see incredibly strong demand with the pricing strategy we’ve gone to market with,” Jacobson said.
EV price cuts shouldn’t affect pricing for GM’s combustion vehicles, he said. The upbeat forecast from GM cheered investors, who sent the automaker’s shares up 5% in premarket trading.
GM expects consistent strength in its core auto operations in 2023, with full-year operating earnings in the range of $10.5 billion to $12.5 billion, or $6.00-$7.00 a share. Analysts had expected $5.73 a share, according to Refinitiv IBES data.
For 2022, GM’s operating profit dropped to a record $14.5 billion.
In the fourth quarter, GM earned $2 billion, up from $1.7 billion the previous year, as higher prices and increased sales volume in North America more than offset higher costs.
Operating earnings per share of $2.12 in the quarter compared with $1.99 a year earlier. Analysts had predicted $1.69.
GM’s average vehicle selling price in North America hit a record $51,000 in 2022, as the company focused production on more expensive, higher-margin vehicles.
GM said capital spending will range between $11 billion and $13 billion in 2023, up from $9 billion in 2022.
Ahead of the earnings release, the automaker said it would invest $650 million in Lithium Americas (NYSE:LAC) and jointly develop a lithium mine in Nevada that it says is the largest known source of the key battery material in the United States.
The company expects revenue from electric vehicles to reach $50 billion in 2025 — about 22% of total revenue — with pre-tax margins in the low to mid-single digits.
GM reaffirmed plans to build a fourth battery plant in the U.S., but did not say when.
