GM lays foundation for 10 percent margins by mid-decade: executive
DETROIT (Reuters) - General Motors Co is laying the groundwork to achieve 10 percent profit margins by mid-decade by launching new models and taking better advantage of its global scale, North American Chief Financial Officer Chuck Stevens said.
The largest U.S. automaker needs an additional $2.5 billion to $3 billion in earnings against its current revenue base to reach its goal. From 2010 to 2012, the company's margins averaged 7.4 percent.
"We just do not get enough economics of scale and leverage off of our global business model," Stevens said during an investor conference held on the same day as the New York Auto Show. "But we're addressing it through a number of initiatives."
Over the next four years, GM will be launching new vehicles at twice the pace of the previous four years. By 2016, nearly 90 percent of GM's sales volumes will be drawn from recently launched models, which will help boost prices.
GM expects an additional revenue boost from turning its luxury Cadillac nameplate into a global brand. This week, GM unveiled a longer Cadillac CTS mid-size sedan redesigned to better compete with German rivals.
Over the next three to four years, GM also expects to save about $1 billion a year in part by developing more of its models on global platforms. This strategy will allow GM to save money by using common components to build a broader range of vehicles.
About 60 percent of the vehicles sold by GM are currently built on global platforms. By 2018, GM hopes to increase that to 95 percent, much like its competitors Volkswagen AG and Hyundai Motor Co.
GM also expects to double its entry-level hourly workforce in the United States to about 10,000 over the next two to three years. These workers have lower salaries than veteran workers.
In 2009, GM filed for bankruptcy protection with the financial support of the U.S. government. The company has since worked to lower its break even point and boost profits. The U.S. Treasury announced last year that it will sell its remaining shares in GM over 12 to 15 months.
GM shares were off 0.3 percent to $28.06 on the New York Stock Exchange.
(Reporting by Deepa Seetharaman; Editing by Maureen Bavdek and Gunna Dickson)
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