(GM) General Motors Invests in Engines and Transmissions

General Motors (GM) announced plans to invest $332 million in four plants in three Great Lakes states in order to gain competitive advantage in terms of fuel-efficient engines and transmission systems technologies.

The plants are located in Toledo, Ohio; Bedford, Ind.; and Flint and Bay City in Mich. The investment at the plant will help GM build a new V-6 engine, a new small motor and new eight-speed automatic transmissions.

Particularly, General Motors would invest $215 million in the Flint Engine Operations in Flint for producing new three- and four-cylinder engines; $55.7 million in Toledo Transmission Operations in Toledo for producing a new eight-speed transmission and expand capacity to build an existing six-speed transmission; $31.7 million in a powertrain plant in Bay City for building parts for a new V-6 engine and components for new small engines; and $29.4 million in a metal castings plant in Bedford to manufacture parts for small engines and for the new eight-speed and existing six-speed automatic transmissions.

GM would also make an additional investment of $46 million at its Romulus and Saginaw plants in Mich. to support production of the new V-6 engine. All these investments will not make any addition to the workforce but preserve 1,650 jobs at the six plants.

General Motors has been desperately trying to catch up with its rivals in engines and transmissions technologies. Its competitors are already producing 10-speed transmissions when the automaker is lagging behind them providing only six-speed transmissions in vehicles. Transmissions with more gears are more fuel-efficient as they allow engines to do less work.

Late 2012, GM has joined hands with Ford Motor Co. (F) in developing a nine-speed transmission for passenger cars and a heavier-duty 10-speed transmission for larger vehicles.

Chrysler Group – controlled by Italy’s Fiat SpA (FIATY) –already has the license to produce the 8HP 8-speed automatic transmissions system (developed by Germany’s ZF Friedrichshafen AG) at its Kokomo Transmission Plant and the Kokomo Casting plant, starting this year. This transmission system is used in many vehicles produced by Germany’s Volkswagen AG (VLKAY).

General Motors has invested $10.2 billion in its North American facilities since 2009. The company has vowed to invest $1.5 billion in its North American plants in 2013 as part of its $8 billion annual investment plan for its global operations for new vehicle development.

So far, GM has announced projects with an investment of $1.2 billion in the U.S. under the $1.5 billion plan. Last month, the automaker announced investment of nearly $250 million for gearing up its CAMI Automotive Inc. assembly plant in Ingersoll, Ontario for future production.

Recently, at an industry conference in Detroit, GM stated that it expects modest growth in global auto sales in 2013 as improvements in China and the U.S. will be offset by sluggish car sales in Europe. The automaker predicted a 5% rise in industry sales in the U.S. and international market each and European market to shrink 4% in the year.

The company foresees pricing pressures to exist, particularly in China and Europe. However, it expects that moderate market share gain across the world, driven by new vehicle launches, will boost its profit margins. GM plans to upgrade 70% of its global lineups by the end of this year.

GM, a Zacks Rank #3 (Hold) stock, posted higher profits of $0.8 billion or 48 cents per share in the fourth quarter of 2012, compared with $0.7 billion or 39 cents in the same quarter of 2011. However, earnings missed the Zacks Consensus Estimate by a penny. The results excluded net gain from special items of $0.1 billion or 6 cents in the 2012-quarter and net loss from special items of $0.2 billion, or 11 cents in the 2011-quarter.

Revenues in the quarter scaled up 3.4% to $39.3 billion, being higher than the Zacks Consensus Estimate of $38.6 billion. Unit sales escalated 4.2% to 2.3 million vehicles. The automaker occupied a market share of 11.5% during the quarter, down from 11.6% in the year-ago quarter.

GM expects to boost its top-line in 2013 with the help of new vehicle launches. At the same time, the company believes cost control measures will boost its bottom line growth. It expects 2013 capital expenditures to be at the 2012-level.
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