GM posted $9.4B net profit in 2016, but encore may be tough

Feb 7, 2017

At an investors' conference during Detroit's auto show in January, confident General Motors executives told investors to expect improved pretax profits for 2016 and 2017, thanks to strong sales in key markets and cost cuts.

DETROIT (AP) — Overall auto sales are flattening in the U.S., GM's biggest profit center, and car inventories are growing. Economic troubles linger in Europe and South America. And a new U.S. president wants to redo the North American Free Trade Agreement and could slap a border tax on imports from Mexico. All of these will make it hard for GM to beat last year's net income of $9.4 billion.

Financial analysts say GM has big advantages over most competitors with a larger presence in China and newer products, especially in profitable trucks and SUVs that are becoming increasingly popular with U.S. and global buyers.

But Barclays analyst Brian Johnson says GM is at risk should President Donald Trump impose a 20 percent tax on vehicles imported from south of the border. About 20 percent of GM's North American production is in Mexico, higher than both its Detroit rivals, Johnson wrote in a recent note to investors. Plus, 42 percent of GM's Silverado and Sierra pickup trucks, which are two of the company's highest-revenue vehicles, are made at a plant in Silao, Mexico, and could be hit by a tax, Johnson wrote.

GM executives said Tuesday that it's too early to tell exactly what will happen with a border tax.

CEO Mary Barra, a member of Trump's council of business leaders, said she has explained the complexity of the auto industry to the president, detailing its long decision-making times for picking parts suppliers and locating factories. "If there are shifts, they have to happen over time," she said.