GM Sets Super-charged Growth Plan

Oct. 1, 2014
The goal is to make GM "the most valued automotive company," chief executive Mary Barra said.

NEW YORK - General Motors (IW 500/5) (GM) Wednesday outlined an ambitious plan for returning its Europe division to profitability, boosting profit margins in North America and growing sales in China, the world's largest auto market.

GM, in an investors and analysts conference, pledged to drive its European unit into the green in 2016 and to increase profit margins in its core North American market to 10.0 percent in 2016, from 7.8 percent in 2013.

The largest US automaker also vowed to grow its luxury Cadillac line and realize savings throughout the company with lower administrative spending and supply chain efficiences.

The goal is to make GM "the most valued automotive company," chief executive Mary Barra told investors and analysts. Barra also spoke of "a culture to win" defined by "candor and accountability at all levels."

Barra largely steered clear of the ignition-switch scandal that caused at least 23 fatalities, according to the latest estimate of independent compensation fund chief Kenneth Feinberg.

The company is under investigation by Congress, regulators and the Justice Department over why it waited about 11 years after first uncovering the ignition-switch problem to start recalling some 2.6 million cars in February.

Barra, who took the helm of the company in January, said GM has worked at "keeping the customer at the center of everything we do as we focused on the recalls."

GM has recalled more than 29 million vehicles for a number of problems in the first nine months of the year.

Barra said GM expects to achieve overall pre-tax profit margins of between 9.0-10.0 percent by the early 2020s, a target depending in part on better results in North America, which accounted for about 33 percent of GM vehicle sales in 2013.

In North America, GM has high hopes for next-generation versions of the Chevrolet Cruze and Malibu, as well as for new entrants in its luxury Cadillac division and a midsize truck, among others.

In Europe, GM plans to trim $100 million in fixed costs and save an additional $700 million in lower expenses. The US giant will also introduce new models such as the Opel Corsa and Astra, estimated to add $300 million in product-launch costs.

GM Europe suffered an operating loss of $844 million in 2013, the only region to record a loss in pre-tax profits.

'Targeting Chinese Growth'

China remains at the center of GM's growth plan, with the automaker targeting sales of 30.7 million in 2018, up from 24.3 million in 2014. The country represented more than one-third of GM's auto sales in 2013.

China has accounted for 72 percent of all auto industry growth over the last 15 years and GM sees the country as a "market that is rapidly maturing," said GM president Dan Amman.

GM plans to launch a financing arm in China in 2015 in part to take advantage of a growing market of second-time auto buyers, to introduce nine new sport utility vehicles and to make a big push with its luxury Cadillac line, Amman said.

GM said it planned to "return excess cash flow" to stockholders through "strong and growing dividends based on sustained improvements in the company's underlying performance." The company offered no specifics for doing so.

GM also avoided details on South America, saying operations in the region "continue to improve." The region has been challenged by a currency devaluation in Venezuela and slowing economic growth in Brazil.

Separately, GM announced that September auto sales rose 19 percent compared with a year ago to 223,437, slightly below analyst projections.

GM shares rose 1.8 percent to $32.51 in afternoon trade.

John Biers, AFP

Copyright Agence France-Presse, 2014

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