General Motors Company GM provided a strategic and operational overview ahead of its third-quarter 2016 earnings release. The company reiterated its EPS guidance in the range of $5.50−$6.00 for 2016, which is higher than $5.02 recorded in 2015. It also aims to generate free cash flows faster to maximize shareholder value by delivering 9−10% margins early next decade.
General Motors’ strategy to generate profitable growth is focused on four targets: creating a long-lasting customer base, concentrating on using state-of-the-art technology and innovation, expanding its brands globally and driving core efficiencies.
The company is set to launch a new electric car, Chevrolet Bolt EV, in late 2016. It will have an EPA-estimated 238 mile range on a completely charged battery. The car is expected to be priced at $30,000, post government incentives. This would price it cheaper than Tesla’s TSLA Model 3 car, which starts at $35,000.
General Motors is focused on sustainable growth, with a target of $5.5 billion in cost savings by 2018. The company has already achieved cost savings of $3.1 billion through the first half of 2016, and expects to exceed the target by 2018.
The automaker is also focused on growing its brands worldwide. It is working toward restoring Cadillac as an iconic luxury brand, expecting the brand’s portfolio to cover 90% of its luxury segment’s volume by 2020 compared to 50% at present. Further, the company plans to launch over 60 new or revamped vehicles in China by 2020, to take advantage of the country’s high growth. Also, 29 new models are likely to be launched in Europe over the same time frame.
General Motors expects growth in the China market to be in the range of 3−5% in the near term, and industry volume to grow to over 30 million units by 2020. Its Chevrolet global car program in partnership with SAIC, primarily aimed at emerging markets, is projected to grow to over a million vehicles annually and generate huge savings as the company replaces existing products.
General Motors is currently in Phase III of its Captive Expansion plan, which commenced in 2010. In this phase, the company aims to increase its share of prime loan channel and grow its floorplan business in North America. It also intends to expand its geographical footprint and product portfolio in the rest of the world. Finally, the company aims to increase loyalty among users by expanding its customer relation management activities. The company expects the implementation of this strategy in North America to result in modest EBT growth in 2016. However, the adjusted EBT is expected to double the 2014 level by 2018 on the achievement of the complete captive penetration levels.
General Motors currently carries a Zacks Rank #3 (Hold).
Some better-ranked auto stocks include Standard Motor Products Inc. SMP and Douglas Dynamics, Inc. PLOW, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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