General Motors Corp. paid a price to get the new four-year contract it wanted with the UAW — $2.6 billion. That loss during the fourth quarter was the difference between the financial results for 2019 and 2018.
The auto giant posted a full-year profit of $6.7 billion, or $4.57 per share, on revenue of $137.2 billion for 2019. The net income figure was down 17.4% from the previous year’s total of $8 billion. Simple math reveals that had it not been for the strike, GM was on track to beat the results from 2018.
During the fourth quarter, the company reported a loss of $200 million, or 16 cents per share, on revenue of $30.8 billion, most of that due to the impact of the 40-day strike by GM hourly workers, who will receive profit-sharing checks worth $8,000 this year.
(GM transforming Poletown plant into primary EV production site)
In all, four weeks of vehicle production were lost in the fourth quarter due to the work stoppage, reducing wholesales by 191,000 units year over year, according to GM. The net strike impact to fourth quarter EBIT-adjusted was a $2.6 billion loss, or $1.39 per diluted-adjusted share. For the full year, the strike reduced EBIT-adjusted by $3.6 billion and lowered adjusted auto free cash flow by $5.4 billion.
While the strike was a big driver of the lesser-than-hoped-for results, the company also put out big money for the launch of its new full-size Chevrolet Silverado and GMC Sierra pickup trucks as well as to its ongoing efforts in electric vehicle development.
“We continue to transform this company for the future,” said Mary Barra, GM chairman and CEO, in a statement. “GM is positioned for strong, long-term business results with a focus on sustainability, and we are confident that our EV and AV strategies will drive shareholder value while improving the environment.”
Unsurprisingly, Chevrolet and GMC full-size pickups drove GM’s underlying business performance in 2019, the company noted. Combined sales of the Chevrolet Silverado and the GMC Sierra were strong, totaling 802,962 pickups, despite having to shut down one of its truck plants in Mexico during the strike.
The combined retail market share grew almost one full percentage point, according to J.D. Power. The final variants of the Silverado and Sierra heavy-duty pickups launched in the fourth quarter, completing the company’s full-size pickup truck line-up.
(UAW workers ratify new GM contract)
“GM will now benefit from a full year of these highly-profitable vehicles in 2020,” the company said in its earnings release.
While trucks did drive the business in North America, it was North America that drove the company to profitability. GM’s International business lost and EBIT-adjusted $200 million for the full year and $100 million in the fourth quarter. All of the losses came from China, where the company’s sales were down last year. The overall Chinese market dropped 8.2% for the year.
Macro business pressures, lower demand for GM China’s outgoing vehicles and slower adoption of new fuel-efficient technology contributed to lower equity income in the fourth quarter, the company noted. GM’s optimistic about 2020 due to an updated portfolio of products, especially in the high-growth SUV and luxury segments. Cadillac sales reached an all-time high of 213,717 units in 2019, an increase of nearly 4 percent.
Excluding China, GM’s international business turned a profit of $200 million for 2019 due to “cost reduction actions and stronger pricing.”
GM officials are positive about 2020. They believe the company will “benefit from new vehicle launches, ongoing cost savings and lean U.S. inventory to begin the year, partially offset by macro factors.” It’s guidance for the year includes: EPS-diluted and EPS- diluted-adjusted is expected to be flat year over year, excluding the effects of the U.S. strike on 2019 results, taxes and interest, and Lyft and PSA investments. Other guidance includes:
- EPS-diluted and diluted-adjusted – $5.75 to $6.25
- Auto Operating Cash Flow – $13.0B to $14.5B
- Adjusted Auto Free Cash Flow – $6.0B to $7.5B
- S. Industry (light vehicle market) – Mid-16M unit range
- China Industry (total retail market) – Mid-24M unit range
(GM turns some temps into full-time employees, idles others)
“We expect another strong year in 2020,” said Dhivya Suryadevara, GM’s CFO. “Our relentless focus on improving our operating performance will enable us to generate strong cash flow through the cycle and invest in our future.”
