General Motors on Tuesday withdrew its 2023 profit outlook just ahead of a latest United Auto Employees walkout at considered one of its most profitable factories.
With the UAW clash throttling revenue and profits, Chief Executive Mary Barra told investors the automaker will slow its electric vehicle technique to put profits ahead of sales targets.
United Auto Employees President Shawn Fain ordered a walkout on the automaker’s Arlington, Texas, factory, which builds highly profitable Cadillac Escalade, Chevrolet Suburban, and other large SUVs. The move got here lower than 4 hours after GM posted better-than-expected third-quarter results.
The UAW’s move to shut down considered one of GM’s most profitable plants will push the weekly cost of the union’s strikes well above the $200 million-a-week rate GM executives outlined for investors earlier Tuesday.
GM’s third-quarter results beat expectations. Fain pointed to that as a cause for the UAW to extend pressure on the corporate to enhance its contract offer, which currently features a 23% wage increase over 4-1/2 years.
Chief Executive Mary Barra told investors the automaker will slow its electric vehicle technique to put profits ahead of sales targets.REUTERS
“It’s time GM staff, and the entire working class, get their fair proportion,” Fain said in an announcement Tuesday.
During a call with analysts, Barra called GM’s offer a record contract that might allow GM’s US factory staff to earn as much as $84,000 a 12 months, and in addition compel the corporate to search for further cost savings.
“We won’t conform to a contract that isn’t responsible to our employees and our shareholders,” she said.
GM’s third-quarter net income fell 7.3% to $3.06 billion, while revenue rose 5.4% to $44.1 billion. The adjusted earnings per share tracked by analysts were $2.28, ahead of Wall Street expectations and up from $2.25 a 12 months ago due to effect of share buybacks.
GM shares were volatile in early trading, hitting their lowest levels in three years before moving up about 1.5%.
The rising toll of the UAW strikes, the outlook for higher labor costs once a latest contract is reached, rising warranty expenses, and an uncertain macroeconomic outlook have forced GM to desert previous targets for full-year financial performance that it had lifted in July.
UAW members picketing a GM plant in Michigan last month.REUTERS
Because the pace of EV sales growth has slowed in North America and even industry leader Tesla is expressing caution over the pace of its expansion, GM is reworking its EV strategy within the region, pulling back from efforts to challenge Tesla’s lead within the US EV segment.
Cutting costs
Barra said the automaker can be slowing the launch of several EV models to chop their costs, and pulling back on EV product spending.
GM will save billions because of a call to revamp and relaunch the Chevrolet Bolt EV, using lower-cost lithium-iron batteries, and jettisoning an earlier plan to spend $5 billion for several latest entry-level EVs, Barra said.
The subsequent-generation Bolt also will use lower-cost lithium-iron batteries purchased from China, GM said.
GM is abandoning a goal of constructing 400,000 EVs from 2022 through mid-2024, Chief Financial Officer Paul Jacobson said.
“We’re just not going to be talking concerning the interim production goals,” Jacobson said.
Barra said the automaker can be slowing the launch of several EV models to chop their costs, and pulling back on EV product spending.REUTERS
Barra said GM has “work to do” to hit its low- to mid-single-digit earnings before interest and taxes (EBIT) margin goal by 2025.
GM’s decision to delay retooling of a big factory in Orion Township, Michigan, to construct electric pickup trucks will save $1.5 billion in capital investments in 2024, Jacobson said.
The delay in electric truck expansion “will actually allow us to include a few of the changes and enhancements that we’ve seen in early-stage production” and improve profit margins when the electrical Silverados and GMC Sierras start production, he said.
The corporate has joined other automakers in urging the Biden administration to back away from ambitious emissions and fuel economy rules geared toward pushing EVs to two-thirds of the US vehicle market by 2032.
Thus far, GM’s sales and pricing in North America have remained stable. Average selling prices for GM vehicles were $50,750 in the newest quarter, barely down from the previous quarter.
Nonetheless, the automaker said its cost-cutting efforts only “partially offset” higher costs for EV launches, increased warranty expenses and lower pension income within the quarter.
Overall, GM said profits for the quarter were pulled down by $1.5 billion because of upper costs and the impact of selling more EVs. Unlike rival Ford, GM doesn’t break out losses from its EV operations.
Jacobson said GM executives are concerned about rising rates of interest in addition to the conflict within the Middle East and whether that would affect consumer behavior. But he didn’t echo Tesla CEO Elon Musk’s pessimism concerning the impact of rising rates of interest on consumer demand.
“What I might let you know is that to date the buyer has held up remarkably well for us as evidenced by the common transaction prices,” Jacobson said.
GM also said losses at its Cruise robotaxi unit widened to $732 million within the quarter. GM said the losses were “in keeping with expectations” as operations expanded to fifteen cities.