General Motors Co announced on Wednesday it is expecting higher profit margins and underlying earnings in 2015 versus 2014, boosted by improved sales in all regions.
GM will also increase its capital expenditure by 20% to $9 billion in 2015, the biggest amount the company has spent since its government-managed bankruptcy in 2009. The move is aimed at ensuring future growth and it will reflect in increased investments in products and technologies, the company said in a statement.
Despite the statement being optimistic compared to the one released one year ago, when GM said it expected profit margins to match the ones in 2013, its was still below analysts expectations, resulting in a stock price drop.
The projections, however, are excluding recall costs. In 2014 GM went through a series of recalls prompted by faulty ignition switches, the company has not yet disclosed figures for the full-year, but it has projected recall-related costs to stand at $2.7 billion. The company has set a provision of $400 million intended for compensation to the injured in accidents caused by the ignition switches. GM is due to announce 2014 results on February 4.
GMs CEO Mary Barra said that performance in 2014 is expected to be stronger than anticipated at the start of the year, without getting into specifics.
“We had a pivotal year in 2014, outlining a customer-focused strategic plan for the company and delivering on our commitments by achieving strong core operating performance,” she added.
Ms. Barra also pointed out that during last year vehicle sales of GM and its joint ventures were up 12% year-on-year to a record 3.5 million units in China, while also launching more vehicles equipped with the 4G LTE technology in North America compared to all other car companies combined.
GM reported five consecutive quarters of margin growth in North America through the third quarter of last year and also paid out $2 billion in dividends in 2014.
“Importantly, improvements in 2015 will keep us firmly on track to meet our near-term objectives and demonstrate solid progress toward our targeted margins of 9 to 10 percent by early next decade.” CFO Chuck Stevens.
GM has not changed its aim to sell more than 500 000 Cadillac models annually by 2020 and to launch its $35 000 all-electric Bolt vehicle, which is projected to have a 200-mile range on a single charge, by 2017.
General Motors Company lost 1.65% on Tuesday and and additional 2.70% on Wednesday to close at $34.30 in New York, marking a one-year decrease of 14.29%. The company is valued at $56.64 billion.
According to the Financial Times, the 15 analysts offering 12-month price targets for General Motors Company have a median target of $39.00, with a high estimate of $51.00 and a low estimate of $27.00. The median estimate represents a 10.64% increase from the last price.
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