GM to earn $350m over three years from 4G technology in cars
General Motors will generate $350 million in improved profit over the three years to 2018 from its rollout of 4G LTE mobile broadband in its cars and trucks, CFO Chuck Stevens said on Wednesday.
Speaking at a Bank of America Merrill Lynch conference, Stevens called GM’s OnStar 4G LTE connection an “untapped, under-appreciated opportunity.” 4G LTE is a wireless connection that allows faster flow of data and developing better in-car technology is critical to automakers like GM to attract younger, tech-savvy buyers.
“Based on our plans today, which are still in the early stages of really taking advantage of this technology, we expect to see $350 million of profit improvement between now and 2018 specific to 4G LTE, and in our view, that’s just the beginning,” Stevens said.
GM has launched 4G LTE in more than 30 of its 2015-model vehicles in North America and expects all 2016 models to have that capability, Stevens said.
Future plans call for its rollout in overseas markets. Stevens also reaffirmed the company’s near-term earnings outlook, saying GM is still targeting improved operating profit and margins in all auto regions this year, as well as achieving 10 percent operating margins and a profit in Europe in 2016. He said GM expects operating earnings at its financial arm, GM Financial, to more than double by 2018.
Asked whether the 10-per cent margin target was overly conservative, Stevens said he would have a hard time saying there wasn’t an opportunity to go higher but the company wanted to reach the target first.
He said GM would reduce its U.S. hourly pension obligations over time and, in answer to a question, said that could involve a similar approach as in 2012 with its salaried employees, when it sold those obligations to a third party.
During the last round of labor talks in 2011, GM and the UAW agreed to discuss ways the automaker could reduce the risk of its pension shortfall, viewed by credit ratings agencies as debt and a concern to GM investors.
The agreement did not detail specific steps, but analysts have said other options could include allowing UAW-represented retirees to voluntarily take lump-sum cash payments in exchange for giving up pension claims. Stevens agreed on Wednesday that that approach could be an option.
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