GM's CFO says 10% margins are here to stay

GettyImages 119325799Photo by Bill Pugliano / Getty ImagesA worker in Flint, Michigan assembles General Motors trucks on the assembly line at the GM Flint Assembly plant July 18, 2011 in Flint, Michigan. GM announced they will be investing $US328 million in the plant to support the production of the next-generation full-size pickups, a move that will create or retain 150 jobs.

General Motors blew away analyst expectations of $US1.19 per share, reporting earnings of $US1.50 and margins of 11.8% for the third-quarter. CFO Chuck Stevens says the company will continue to experience high margin returns of at least 10%.

“We achieved our 10% and we expect to achieve a 10% margin objective a year in advance of our long-standing commitment, and our plan is to sustain that on a go forward basis,” Stevens revealed during a Bloomberg Go interview.

“We continue to focus on driving efficiency in the business and let’s remember we are entering the heart of our launch cycle in North America where fundamentally we will change over the entire passenger car and crossover portfolio over the next few years. We are confident we will be able to maintain the same type of performance we have seen in 2015,” he added.

Trucks and SUVs drive a tremendous portion of GM’s margin and Steven’s believes the company is positioning itself for a time when gas prices normalize. “We are seizing the opportunities that are being presented by the market. But long-term we are driving our earnings and driving our business so we have quality of earnings across our portfolio.”

Stevens says the next generation of the Cruz, Malibu, and crossover lines will be “more profitable than the vehicles they replace.”

He says the company is focused on “quality of earnings across the portfolio and intense focus on costs.”

That quality of earnings was tested by a strong US dollar that was met head-on by the company’s focus to drive cost efficiencies and price aggressively to maintain year-over-year profit and revenue improvements.

“Clearly on a year-over-year basis we have experienced some headwinds. You see it in our revenue Numbers, revenue is actually down, primarily because of foreign exchange. But we have been able to largely able to offset that by driving cost efficiencies, pricing aggressively,” Steven’s told Bloomberg.

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