Profit Falls in Fourth Quarter at General Motors

On Tuesday, General Motors Co announced that its net income for the fourth quarter fell due to the U.S. dollar strength against the pound in Britain and forecasted flat per share profit for 2017. The news sent GM share plunging by almost 5%.

The fall in the share prices reflected concerns as well about increasing inventories of vehicles unsold across the U.S.

Despite investing in new technology, like automated vehicles, as well as new SUVs and trucks, GM said analysts is not likely to show any substantial growth during 2017 following two straight record years of profits.

Shares in Ford Motor and Fiat Chrysler, GM’s biggest U.S. rivals, were also down on Tuesday.

The most recent results by GM, the third biggest automaker in the world, underscores the challenges that that chiefs in the auto industry are facing as the era of low interest and open trade that fed recent growth appears to be coming to an end.

During a call with analysts, CEO at GM Mary Barra and the CFO Chuck Stevens were asked what if any impact on GM would occur if President Trump succeeds in placing new import taxes on vehicles as well as auto parts.

Barra answered that she has shared dialogue with the new administration and to date the administration is listening.

Stevens said imported parts’ value in its vehicles in the U.S. is less than most rivals.

He added that GM supports tax reform that makes the manufacturing base in the U.S. stronger. A tax at the border is a single part, but there are a number of moving pieces, he added.

In North America, which is where GM earned most of its profit, inventories of vehicles not sold at dealers in the U.S. were up a third to over 845,000 units at 2016 yearend.

Stevens added that the automaker built its inventories up prior to product launches and is intending to bring that number down during 2017.

Adjusted profit margins for GM in North America were down to 8.4% during the fourth quarter from 10% for the same quarter one year ago.

Profit margins in North America for the full year of 2016 reached 10.1% which were also down from the 2015 full year of 10.3%.

The foreign currency exchange hit the company took in net income for the fourth quarter was $500 million. Of that, $300 million was due to the British pound dropping in value after voters voted to leave the European Union.

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