Big Incentives and Bursting Inventory Somehow Leads to Record Income for GM

The grim memories of 2008 and 2009 only plague Renaissance Center denizens in the form of night terrors now, as General Motors finds itself on financial ground that’s oddly solid, considering some of the factors effecting the company.

Faced with a slowdown in the automotive market in 2016, the automaker — like so many others —boosted incentives on its vehicles. Meanwhile, the U.S. public’s insatiable thirst for SUVs and crossovers left some of the General’s cars high and dry, sending inventories soaring to very unhealthy levels. While new crossovers were in the pipe in 2016, those lucrative models weren’t scheduled to land until this year. GM’s European division, meanwhile, struggled to rise out of the red.

Despite all of this, the company posted record income and revenue in 2016, according to an earnings report released today.

Last year, GM’s piggy bank saw a record adjusted net income of $12.5 billion, up 15.9 percent from the year before. Net revenue stood at $166.4 billion — 9.2 percent higher than 2015’s tally. Fourth-quarter revenue rose 10.8 percent to $43.9 billion. While foreign currency changes kneecapped Q4 income to $1.8 billion, in line with estimates, it was still up significantly from a year prior.

Global vehicles sales rose 1.2 percent compared to 2015. With such pleasing results, GM’s outlook for 2017 can best be described in one word: rosy.

“By almost any measure, 2016 was a great year for our business and I am confident we can achieve even stronger results,” said GM CEO Mary Barra in a statement.

To keep things rosy, the automaker has had to do some less-than-happy things. Those ballooning inventories led to layoffs at multiple midwestern plants, with extra downtime planned to ease the flow of slower-selling car models. An efficiency program that began in 2015 continued through 2016, freeing up money to firm up the company’s bottom line.

Still, there’s a number of redesigned models arriving in 2017, and luckily for GM, they’re all crossovers. The downsized GMC Terrain and Chevrolet Equinox arrive early this year as 2018 models, while the full-size Chevrolet Traverse and Buick Enclave crossovers are also ready to go.

According to the automaker, “GM expects its global volume from new or refreshed vehicles to grow to 38 percent from 2017-2020, up from 26 percent in the 2011-2016 period. New or refreshed crossovers, trucks and SUVs are expected to represent a majority of this volume between 2017-2020.”

[Image: General Motors]