The top executive at General Motors Co. is having doubts about whether U.S. auto sales will recover this year as expected, even as the stock market rebounded a bit Tuesday from its huge losses.
Speaking to industry analysts Tuesday about GM's long-term financial plans, Dan Akerson, GM chairman and CEO, said the company is sticking with its U.S. sales forecast of around 13 million cars and trucks for the year, but he's not certain sales will make it that high.
"There's a lot of turmoil in the business, and turmoil means uncertainty," Akerson said. GM's finances, he said, are strong enough to "power through these dips" in sales.
Akerson made the statements amid optimistic predictions for the future of the company, which has made billions just two years out of Chapter 11 bankruptcy protection. Analysts were told that GM is looking to become more efficient so it can make even stronger profits and that it plans to raise factory capacity by 45 percent in Brazil, Russia, India and China by 2014 to take advantage of expected sales growth.
Company executives spoke at GM's second annual global business conference. The U.S. stock market slide and international government debt problems barely were mentioned during the presentation, which lasted more than four hours.
GM's shares have lost more than 20 percent of their value since its November initial public stock offering, although they recovered a bit Tuesday with the rest of the market, closing up 97 cents, or nearly 4 percent, at $25.54.
During the presentation, GM executives outlined cost-saving measures that included halving the number of frames used for its vehicles around the globe. Last year, GM had 30 frames, known in the industry as platforms. By 2018, it plans to cut that number to 14. It also will sell more of the cars and trucks built on those platforms worldwide, saving on manufacturing, engineering and design costs. The company also plans to cut the number of engines it develops, as well as reduce the number of parts it uses.
GM said just 6 percent of its cars and trucks now are built on global platforms. That will rise to 90 percent by 2018 as the company tries to catch up with industry leaders.
Ford Motor Co., for example, began a similar effort four years ago and is on track to cut its global platforms to 12 by 2013, according to a research note from Bank of America released Tuesday. Ford had 27 platforms in 2007. Ford aims to build 83 percent of its cars and trucks on global platforms in 2013.
GM executives also said the company plans to keep its annual capital investment consistent, even when car sales are down. That will save money by ending the practice of stopping and starting projects. Mary Barra, GM product development chief, estimated that slowdowns, cancellations and other turmoil have cost the company $1 billion per year.
Barra wouldn't say exactly how much the company will save from cutting platforms and other changes.
GM earned $5.7 billion in the first half of this year, but the company said last week that it expects results to be "modestly lower" in the second half because of seasonal drops in sales and possible increases in incentive spending. Last week, GM reported its sixth straight profitable quarter, ending June 30, with net income of $2.5 billion.
GM remains part-owned by the government, which took a share in the automaker as part of a $50 billion bailout. The government sold some of its interest in November as part of GM's initial public offering but still holds 500 million GM shares. The government needs $26.4 billion to recoup its full investment in GM, meaning GM's shares would have to sell for roughly $53 per share.
Chief Financial Officer Dan Amman said the company won't talk about buying back common shares or paying dividends until early next year.