How The Fed's Dovish Tone Undermines General Motors' Future Earnings

In a conference call Friday, General Motors Company GM told analysts at Deutsche Bank its hopes for achieving its target of doubling earnings by the year 2018 had been effectively quashed. The culprit? The Federal Reserve.

General Motors’ ambitious earnings objective was to double 2014 earnings of $800 million by 2018. A significant pillar of this plan was the increase of interest rates and its ability to make subvented leases more appealing.

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Subvented leases are leases that receive a subsidy, which reduces monthly car payments. They are often offered by car companies to help move through slow-selling inventory, but now General Motors thinks these subsidies will not provide as deep of a discount to monthly rates on vehicle leases not subvented.

With the Fed’s time-table for interest rate increases extended after its most recent meeting, General Motors now sees its doubled-earnings goal pushed out to at least 2019. Deutsche analysts pointed out that fewer subvented products should benefit the company to some degree, however.