GM says it won’t meet a previous goal of selling 400,000 EVs next year
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General Motors Co. can no longer say if it will make up to US$14 billion in profit this year because a United Auto Workers strike, now in its sixth week, has made the company’s financial future too difficult to predict.
The Detroit carmaker pulled the forecast Oct. 24 while reporting better-than-expected third-quarter results. GM made an adjusted profit of US$2.28 a share, beating Wall Street estimates of US$1.84, thanks to growth in its North American business and historically high vehicle pricing. Revenue was $44.1 billion, almost US$1 billion more than analysts had forecast.
A UAW negotiator said last week the two sides were inching toward a tentative deal, but the withdrawal of guidance shows the end of the strike is as unpredictable as UAW president Shawn Fain, who has kept GM, Ford Motor Co. and Stellantis NV guessing by stopping work at select plants.
“We’re not going to sign a deal that doesn’t allow us to be competitive,” GM chief financial officer Paul Jacobson said in an interview with Bloomberg Television.
On Friday, Fain said the union was close to a deal with all three automakers but that there was “more to be won.” The union has 23 per cent raises on the table from all three automakers but wants a 25 per cent raise, people familiar with the matter told Bloomberg earlier this month.
Strike eroding profits
GM’s third-quarter profits fell compared with the same period last year. Net income slipped US$241 million to US$3.1 billion. That was mostly related to strike costs, though higher replacement-part costs played a small role.
“We believe GM should be able to offset most of the UAW-driven increased wage headwind,” Chris McNally, an analyst at Evercore ISI with an “outperform” rating on the stock, said in a research note to clients. McNally said the decision to suspend full year guidance was not a cause for concern. “Why give the UAW any forward information while negotiations remain ongoing?”
GM fell 0.6 per cent to $29.05 as of 9:45 a.m. The stock is down about 13 per cent so far this year.
To offset higher expected labour costs, Barra said that GM plans to reduce fixed costs by US$2 billion coming out of 2024.
GM will provide new financial guidance for 2024 once a union contract is ratified. The Detroit automaker had previously projected 2023 earnings before interest and taxes to reach between US$12 billion and US$14 billion, compared to its previous guidance that peaked at US$13 billion. It also had forecast earnings per share for the full year of between US$7.15 and US$8.15, up from a maximum of US$7.35 a share previously.
EV slowdown
The automaker also is rethinking growth plans for electric vehicles as sales of plug-ins have been slower than anticipated. GM said it will put off opening its electric pickup truck plant in Orion, Mich., outside Detroit until 2025 — a year later than it previously targeted. Jacobson said the move will delay capital spending by US$1.5 billion in 2024 to 2025.
The company will continue manufacturing battery-powered versions of its Chevrolet Silverado and GMC Sierra pickups alongside the electric Hummer at a plant in Detroit, but won’t add new production until the company better understands market demand and makes improvements to the trucks that boost their profitability.
One bright spot is that GM is profitable in every region. But there are signs of trouble in some business lines.
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