BUSINESS

General Motors Plans A Move Into Autonomous Cars, Ride-Sharing Amid Major Cost-Cutting

10/01/2015 11:07 EDT | Updated 10/01/2016 05:12 EDT
Bill Pugliano via Getty Images
DETROIT, MI - SEPTEMBER 17: The General Motors world headquarters building is shown September 17, 2015 in Detroit, Michigan. Mary Barra, Chief Executive Officer of General Motors, and Mark Reuss, President of GM North America, held an Employee Town Hall Meeting and a question & answer session with the news media today to discuss GM's $900 million settlement with the Justice Department over GM's ignition switch recalls. (Photo by Bill Pugliano/Getty Images)
MILFORD TOWNSHIP, Mich. — General Motors plans to cut $5.5 billion in manufacturing, purchasing and administrative costs during the next three years, helping to finance a big push into autonomous cars and car- and ride-sharing services.

The company told investors Thursday that the savings in logistics, manufacturing, information technology and other costs will more than offset increased investments in brand development and new technology.

GM says it will start testing a fleet of self-driving Chevrolet Volt plug-in hybrid cars late next year at its giant technical centre campus north of Detroit. It also announced two car- and ride-sharing services that it expects to generate added profits. The test Volts will be summoned by employees with a smart phone app.

CEO Mary Barra said the tests will allow GM to form a relationship with customers "for a whole variety of ways people can get from point A to point B."

Product Development chief Mark Reuss said the autonomous car tests aren't being announced just to get media attention. "We're not doing this as a publicity stunt. This is real," he said. He wouldn't predict when the public will be able to use autonomous cars on real roads but hinted that a forecast would come during a presentation for analysts.

The company also made a key prediction about reduced battery costs for electric cars that could speed price reductions. Currently its battery cost per kilowatt hour is $145, but that will drop to $100 by 2018, a reduction that could make the cars more competitive with internal combustion engines.

GM now sells the Chevrolet Volt, which can go about 40 miles on battery power before a gasoline generator kicks in. It also has promised to roll out the Chevrolet Bolt, a $40,000 fully electric car with a 200-mile range, in 2017.

The company also said during its annual investor presentation that global growth initiatives will increase earnings per share to $5 to $5.50 next year. GM projects full-year earnings this year of $4.50 per share this year, up from $4.12 in 2014.

Pretax profit margins, the percentage of revenue that GM gets to keep, will grow to 9 to 10 per cent by early next decade, the company said. Currently they're at 6.8 per cent.

It expects total sales in China to slow to a 3 to 5 per cent annual growth rate between now and 2020. The market had been growing at a 17 per cent annual rate from 2008 through 2014.

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