DETROIT (Reuters) – General Motors Co on Tuesday pulled its 2023 earnings forecast, blaming rising costs on strikes by United Auto Workers, and CEO Mary Barra said the automaker would slow its electric vehicle strategy to boost profits. Ahead of sales goals.
GM’s third-quarter net income fell 7.3% to $3.06 billion, while revenue rose 5.4% to $44.1 billion. Adjusted earnings per share tracked by analysts were $2.28, ahead of Wall Street expectations and up from $2.25 a year ago due to the impact of stock buybacks.
General Motors shares rose 1.8% after earlier falling to their lowest levels in three years.
The rising death toll from UAW strikes, expectations of higher labor costs once a new contract is reached, higher warranty expenses and an uncertain macroeconomic outlook forced GM to abandon previous full-year financial performance goals it raised in July. . Well Fargo analyst Colin Langan said the impact of the hit was not surprising.
UAW strikes have cost the company $200 million during the third quarter and $600 million so far in the fourth quarter, GM Chief Financial Officer Paul Jacobson said in a briefing with reporters.
Jacobson said the costs of the strike amount to $200 million per week. He did not discuss the potential impact if UAW President Sean Fine ordered new strikes at GM’s most profitable North American plants such as the Arlington, Texas, plant, which makes Cadillac Escalades and Chevrolet Suburbans, or the Flint, Michigan, heavy-duty truck assembly plant. .
The UAW has called GM’s current contract offer insufficient. Barra described it as a standard contract that would allow GM plant workers in the United States to earn up to $84,000 annually, and force the company to look for more cost savings.
“We will not agree to a contract that is irresponsible to our employees and shareholders,” she said.
With electric vehicle sales growth slowing in North America and even industry leader Tesla expressing caution about the pace of its expansion, General Motors is reshaping its electric vehicle strategy in the region, retreating from efforts to challenge Tesla’s leadership. In the electric vehicle sector in the United States.
The automaker is also slowing the launch of several electric vehicle models to lower its costs, and to hold back on spending on electric vehicle products, Barra said.
Barra said GM will save billions thanks to its decision to redesign and relaunch the Chevrolet Bolt EV, using lower-cost lithium-iron batteries, abandoning an earlier plan to spend $5 billion on several new entry-level electric vehicles.
GM said the next generation Bolt will also use lower-cost lithium-iron batteries purchased from China.
GM is abandoning its goal of building 400,000 electric vehicles from 2022 through mid-2024, Jacobson said.
“We’re not going to talk about interim production targets,” Jacobson said.
GM has “work to do” to achieve its low-to-mid-range earnings before interest and tax (EBIT) margin target by 2025, Barra said.
GM’s decision to delay retooling a large plant in Orion Township, Michigan, to build electric pickup trucks will save $1.5 billion in capital investment in 2024, Jacobson said.
He said the delay in expanding electric trucks “will actually allow us to incorporate some of the changes and improvements we saw in the early production phase” and improve profit margins when production of electric Silverados and GMC Sierras begins.
The company has joined other automakers in urging the Biden administration to roll back ambitious emissions and fuel economy rules that aim to push electric vehicles to two-thirds of the US auto market by 2032.
So far, GM’s sales and prices in North America have remained stable. Average GM vehicle sales prices were $50,750 last quarter, down slightly from the previous quarter.
However, the automaker said its cost-cutting efforts only “partially offset” higher EV launch costs, higher warranty expenses and lower pension income in the quarter.
Overall, GM said profits for the quarter fell by $1.5 billion due to higher costs and the impact of selling more electric vehicles. Unlike rival Ford (FN), GM does not incur losses from its electric vehicle operations.
Jacobson said GM executives are concerned about rising interest rates as well as conflict in the Middle East and whether that might impact consumer behavior. But he did not echo Tesla CEO Elon Musk’s pessimism about the impact of rising interest rates on consumer demand.
“What I would tell you is that the consumer has held up well so far for us as evidenced by average transaction prices,” Jacobson said.
GM also said losses at its Cruise robotaxi unit widened to $732 million in the quarter. GM said losses were “in line with expectations” as operations expand to 15 cities.
(Reporting by Joe White and Nathan Gomez – Preparing by Mohammed for the Arabic Bulletin) (Additional reporting by Ben Klayman) Editing by Chizu Nomiyama, Mark Porter and Nick Zieminski
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