Will General Motors Growth Be Slowed By Troubled European Market in 2013?
In line with comments made by CEO Dan Akerson last week, General Motors (NYSE:GM) CFO Dan Ammann sees a positive but modest 2013 for America’s largest car marker — but humble growth isn’t what investors are looking for. Shares were off over 4 percent in morning trading on Wednesday.
“We see modest growth in the industry and, although we see improvement in the U.S. and China, there will be a contraction in Europe so there is a pretty limited growth environment,” said Ammann after a conference in Detroit this week.
GM is entering 2013 following tremendous gains in 2012. The company’s stock climbed 37 percent for the year, and is up another 6 percent so far in 2013. The company’s 2011 U.S. market share of 19.1 percent contracted slightly to 18.8 percent at the hands of overseas competitors like Toyota (NYSE:TM) and Honda (NYSE:HMC) — now with 14.3 and 9.8 percent of the market, respectively — but the company doesn’t feel like its leading position is threatened.
On the back of a modest 2013, GM “will set the stage for enhanced profitability in the coming years,” said GM North America finance chief Chuck Stevens, according to the Wall Street Journal. The company is looking to hit a series of goals, including attaining investment-grade credit, a 10 percent margin on earnings before interest in North America (currently at 7.8 percent), and perhaps re-take the title as the world’s largest automaker, which it lost to Toyota in 2012.
But this news did not sit well with investors, who seem willing to take a breather after a long run of nearly 56 percent over the past half-year period.
Europe’s economic crisis has been particularly brutal on automakers. GM and Ford (NYSE:F), which also has a heavy footprint in the region, each lost over a billion dollars in Europe last year alone. Car sales have dropped for five years in a row, from nearly 16 million annually in 2007 to about 12 million in 2012, its lowest level since 1995.
While car sales in the U.S. market ended December on a strong foot, at an annualized rate of nearly 15.5 million, Europe’s market tells a strikingly different story. New car registrations for the month fell 16.3 percent, their steepest decline since 2008, with high drops in major economies such as France and Germany.
GM is expecting to cut its losses by between one-third and one-half in 2013, and return to profitability by 2015. However, these expectations are predicated on a broad recovery in Europe, which is still by no means certain. December sales numbers that show declines in France and Germany, Europe’s two largest economies, raise some red flags.
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