GM Says It Could Stomach a 40-Percent Industry Sales Drop Thanks to Cost-Cutting Efforts

General Motors is searching for savings under every RenCen couch cushion as it ramps up a profit-boosting cost-cutting effort.

The automaker has already chopped plenty of what it sees as fat, and is so confident in its streamlining abilities that it now claims it could weather a major plunge in sales. Even, say, a 40-percent dropoff.

For a company that knows all about sales plunges — recent ones, too — this is pretty confident talk. It has to be, as GM wants you — yes, you! — to invest.

The comments are found in GM’s dry-sounding Strategic and Operational Overview, released yesterday. In it, the automaker describes the headway it’s made in its four-year cost-cutting plan, which aims to realize $5.5 billion in efficiencies by 2018.

As of the end of the first quarter of this year, GM has achieved $3.1 billion of its goal. The money saved, it claims, more than offset “incremental” investments in engineering and technology development. By 2018, the target should be well in the rear-view, the company says. The automaker also plans to sustain a 9-to-10 percent margin on its business by the early 2020s.

GM is clearly trying to get investors on board, predicting a profit of $6 a share for 2016. We’re all about maximizing shareholder value!, the document shouts. The rosy financials and predictions serve to strengthen its pitch to potential investors, many of whom might have cold feet due to that unpleasant thing that happened to GM not too long ago.

That last thing GM wants is to give the impression that there’s any chance of having to go, cap in hand, back to the federal government for a bailout. Don’t think that could ever happen, GM soothes, and by the way, we plan to return extra free cash to shareholders if we don’t need it.

Compelling, but there’s another issue to worry about. After a dizzying sales climb out of the depths of the recession, analysts predict an industry-wide sales slump. Will it be bad, and how long will it last? No one can say for sure, but the slowdown in new car sales is expected to last several years.

In late June, consulting firm AlixPartners predicted the trend would bottom out at 15.2 million units in the U.S. in 2019, compared to 17.45 million in 2015. Already, some sales predictions for this year have been dialed back.

GM claims it has the ability to weather a much greater slump. In the document, the automaker says it could remain profitable even if U.S. auto sales fell 40 percent, or to about 10.5 million new vehicle sales per year.

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