Autos

GM sees 2017 earnings of $6-$6.50 a share, higher than 2016 despite Trump border tax worries

Mary Barra, Chairman and CEO of General Motors, holds a media briefing at the 2016 GM Annual Meeting of Shareholders on June 7, 2016 in Detroit, Michigan.
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Despite growing questions about whether changes to NAFTA or U.S. trade policy could hurt profits for automakers, General Motors on Tuesday issued a robust forecast for 2017 that was significantly higher than Wall Street analysts had been expecting.

GM shares jumped more than 5 percent on the news.

"Our overall financial outlook for 2017 is based on expected strong performance in North America and China, strong growth of GM financial, continued cost efficiencies, improvement in South America and an ongoing strong vehicle launch cadence," said General Motors Chairman and CEO Mary Barra.

For 2017, the automaker expects:

  • Full year earnings per share of $6-$6.50, up from expected earnings of $5.50-$6 in 2016
  • Higher revenue
  • To maintain or improve its EBIT and EBIT margins
  • Free cash flow of about $6 billion

According to Thomson Reuters, analysts, on average, had been predicting GM would earn $5.76 a share in 2017.

GM's earnings are accelerating, thanks in part to its position as the leading automaker in both China and the U.S., the two biggest and most lucrative auto markets in the world. Combined, the two markets accounted for about two-thirds of the automaker's sales last year.

Still, Barra and GM executives face the growing uncertainty about the company's large footprint in Mexico, where it manufactured 385,000 vehicles that were imported and sold in the U.S.

President-elect Donald Trump recently criticized GM in a tweet for building the Chevrolet Cruze in Mexico and importing them for sale at U.S. dealerships.

GM has maintained it will continue to build in markets where its vehicles are sold, which includes running plants in Mexico for vehicles sold in the U.S. and Canada.

When asked about whether that approach will change if the Trump administration succeeds in imposing a border tax on imported vehicles, Barra refused to speculate.

"Recognizing what we are trying to accomplish, we think there are many things we can do, and working with the administration that are going to make America great again, and that are going to strengthen business, which is going to strengthen growth, which will strengthen jobs," she said.