GM Gives 50,000 Workers $11,750 “Crumbs” due to Tax Cut
Let’s see what Nancy Pelosi and the Democrats have to say about this windfall for GM workers.
According to Fox 2, there will be some happy workers in the auto industry.
A $7.3 billion accounting charge pushed General Motors into a $3.9 billion net loss for 2017, but without the expense the company posted record per-share earnings.
Excluding one-time items, GM made $9.9 billion, or $6.62 per share, the highest since leaving bankruptcy in 2009. The earnings beat Wall Street estimates. Analysts polled by FactSet expected $6.33 per share. Full-year revenue was $145.6 billion, which also beat estimates.
GM says the change in the U.S. tax code forced it to write down accumulated losses that it uses to avoid corporate income taxes. The assets went from $33.6 billion to $24 billion. Since the rate fell from 35 percent to 21 percent, the losses are worth less.
About 50,000 GM factory workers will get $11,750 profit-sharing checks later this month.
There’s no telling how many of these people were Trump voters. But with an unexpected payday like that, you have to believe that even the most ardent anti-Trumpers has to reconsider his or her position.
— General Motors (@GM) February 6, 2018
While GM can boast of two years of great earnings under Obama, those earnings were based on bankruptcy, and a $10 billion profit from loans from the government.
Last year, GM had a new reason for optimism. As they said in their own annual report:
Results were driven by strong performance in North America, improvement in GM International led by strong equity income in China and a return to profitability in South America, sustained growth of GM Financial and an intense focus on costs.
That strong performance in North America is based on an economy where consumers have jobs. And few can argue that Donald Trump’s trade policy with China strengthened GM’s position there.
So like America, GM had a stellar 2017. But what does the company feel about its future under President Trump?
As St. Louis Today reported,
Chief Financial Officer Chuck Stevens said GM still expects economic growth this year even with a possible 0.75-point increase in the prime interest rate. He says credit availability is still strong, interest rates are relatively low, and he expects wage growth and more disposable income from tax reform.
“We are constructive that 2018 will be another strong year both globally and in the U.S.,” Stevens said. “We are not overly concerned at this point around some of the discussion around inflation that we’ve seen. We think overall the macro environment is and will remain constructive.”
For the fourth quarter, GM posted a $5.2 billion net loss due to the accounting charge. Without charges, the company made $2.4 billion, or $1.65 per share, soundly beating analyst estimates of $1.39. Fourth-quarter revenue was $37.7 billion, which also beat analyst estimates.
So GM believes it will still sell lots of units, as in cars, trucks, and other vehicles. They certainly have reason to feel optimistic, given the upselling of units in 2017. Take a look:
Sales of the Equinox rose 20 percent in the U.S. last year and the more expensive Traverse grew 5.8 percent. The new Equinox sold for an average price of almost $25,700 last month, up more than $3,000 from the average last year for 2017 models. The Traverse sells for an average of about $36,800, up about $7,000, according to data from GM.
GM also started selling redesigned versions of the Buick Enclave and GMC Terrain last year. Its Cadillac XT5 crossover made major gains, with U.S. deliveries surging 73 percent in 2017. Demand for the luxury brand is rapidly growing among Chinese consumers, with the division expecting global profit to double by 2021.
$3,000 more on one unit, $7,000 more on another unit. Holy Mother of King Solomon.
Those are amazing profitability numbers. But the best number is the 73 percent surge in U.S. deliveries in 2017. That’s lots of Americans buying vehicles.
And what about the news in China?
That market is now buying GM’s luxury vehicles, and the company expects to double sales? Sounds like GM is about to help with President Trump’s inherited $350+ billion trade gap next year.
In short, GM would not have had the year it had this year, under Obama. Certainly 50,000 employees wouldn’t be receiving almost $12,000 in profit-sharing. And no matter what Pelosi says, $11,750 is not peanuts to the average American.