GM swings to a loss in the fourth quarter as 40-day strike erodes profits

DETROIT — General Motors lost $194 million in the fourth quarter largely because of the 40-day autoworkers strike that cost it four weeks of vehicle production and eroded any profit.

GM said the strike cost it $2.6 billion in earnings before interest and taxes during the three months ended Dec. 31, shaving $1.39 per share off its EPS on an adjusted basis. The impact for the year was $3.6 billion.

The company still beat Wall Street’s earnings expectations for the fourth quarter, but its revenue came in slightly below expectations.

GM’s stock rose 2.6% in premarket trading to just over $35 a share. For the past year, shares are down about 11.7%, including a 6.1% decline this year. The automaker is valued at about $49.1 billion.

Here’s what GM reported on Wednesday compared with what Wall Street expected, according to Refinitiv consensus estimates:

• Adjusted earnings: 5 cents per share vs. 1 cent per share expected.
• Revenue: $30.8 billion vs. $31.04 billion expected.

The company’s 2020 guidance includes adjusted earnings of $5.75 to $6.25 per share and adjusted operating cash flow of $13 billion to $14.5 billion. Its adjusted automotive free cash flow is expected to range $6 billion to $7.5 billion.

GM’s operating profit remained healthy. The company reported an operating profit, which is earnings before interest and taxes, of $8.4 billion for the year, including $105 million in the fourth quarter. That’s down from $11.8 billion in 2018 and $8.4 billion for the fourth quarter of that year.

“In 2019, the core operating results were strong,” GM CFO Dhivya Suryadevara told reporters during a briefing Wednesday morning.

North American operations earned $8.2 billion last year, including $263 million in the fourth quarter. That’s down from $10.8 billion in 2018, including $3 billion in the fourth quarter 2018.

International operations, led by eroding profits in China, lost $202 million for the year, including $120 million in the fourth quarter. Its profits in China were nearly cut in half from $2 billion in 2018 to $1.1 billion last year, including a roughly $68 million slide in the fourth quarter to $239 million.

Suryadevara said GM remains “bullish” on the long-term China market amid a “maturing industry” with increased competition and slowing sales.

She declined to speculate on the impact of the coronavirus outbreak. The country has extended a temporary factory shutdown through many provinces hit by the disease.

“It’s a fluid situation. Our focus is really on our employees and their safety first,” she said. “From a business standpoint, we are accessing the impact on demand, the impact on global supply chain and we’ve activated contingency plans across the enterprise. People are working around the clock here trying to mitigate the impact of this going forward, but it’s early days and it’s very fluid.”

Wall Street’s attention was expected to be on the Detroit automaker’s operations in China, where sales fell 15% last year, as well as the company’s 2020 outlook amid growing challenges in North America and China.

GM reported its fourth quarter and 2019 earnings ahead of an investor day from 10 a.m. to 2 p.m. Wednesday from the New York Stock Exchange. Executives including CEO Mary Barra will discuss the company’s operations and outlook at length as GM pivots toward all-electric vehicles, including at least 20 new EVs globally by 2023.

GM’s earnings come a week after the automaker confirmed plans to resurrect the Hummer, best known as a gas-guzzling, military-style SUV, as an all-electric “super truck” with massive horsepower, acceleration, and torque.

When asked about Tesla’s recent run to a roughly $160 billion valuation, which is more than three times that of GM, Suryadevara said executives believe GM is “a compelling investment opportunity” that has strong financials and a “unique position” in autonomous and all-electric vehicles. She used the Hummer EV as an example of the strength of the company.

“We’re all in and we’re very excited about it,” she said. “From a share price standpoint, we’re very bullish on the future and what we’re going to do is put those proof points on the board to make sure that that’s clear to all investors as well.”