General Motors Co. keeps finding ways to defy the impact of inflation and rising interest rates, easily beating analyst earnings estimates in the latest quarter and raising 2023 profit projections for the second time this year. But that hasn’t garnered excitement from shareholders.
(Bloomberg) — General Motors Co. keeps finding ways to defy the impact of inflation and rising interest rates, easily beating analyst earnings estimates in the latest quarter and raising 2023 profit projections for the second time this year. But that hasn’t garnered excitement from shareholders.
Investors are signaling concern about the Detroit carmaker’s slow ramp-up in electric vehicles and potential unrest this fall when GM will negotiate a new four-year labor deal with the United Auto Workers.
Even with the upward guidance revision, Chief Executive Officer Mary Barra felt the need to reiterate that GM is on track for an all-electric future in an environment in which Tesla Inc. is slashing prices to retain its global leadership in EVs.
“I’m very confident with the product portfolio we have coming, the pricing and demand” for EVs, Barra said on a conference call Tuesday.
That increase in EV output and hitting new guidance will depend on staving off a strike as a Sept. 14 deadline approaches for a new labor contract. Wall Street analysts have flagged the UAW talks as a key risk for automakers this year — reflecting a muted reaction from investors to GM’s strong results.
Read more: Biggest Auto Union Gears Up for Fight Over Battery Worker Pay
Shares of the company pared an early drop of as much as 5.6% to trade down 2.7% to $38.26 as of 10:02 a.m. in New York.
Barra sought to assuage concerns about a work stoppage, even though she conceded her bullish full-year outlook assumes no strike.
“We have a long history of negotiating fair contracts with both unions that reward our employees and support the long-term success of our business. Our goal this time will be no different,” Barra said in her letter to shareholders.
Big Beat
GM raised its profit target for the year by at least $1 billion and said its second-quarter earnings beat analysts estimates on stronger-than-expected US sales, especially its largest and most profitable models.
The Detroit automaker projected 2023 earnings before interest and taxes to reach between $12 billion and $14 billion, compared to its previous guidance that peaked at $13 billion. GM also forecast earnings per share for the full year of between $7.15 and $8.15, up from a maximum of $7.35 a share previously.
Adjusted earnings per share came to $1.91 for the three months to June 30, above the consensus estimate of $1.86.
Those results show that while investors eagerly await progress in GM’s electric-vehicle program, its legacy business making gasoline and diesel-fueled SUVs and trucks are allowing it to crank out big profits. Consumers are buying the thirstiest and most expensive models despite rising interest rates and elevated sticker prices.
Higher revenue drove up profits in the most recent quarter. GM’s $44.8 billion tally surpassed analyst expectations of $42.8 billion — and came in well ahead of $35.8 billion a year ago.
The carmaker’s North American business unit reported a 39% jump in operating profit to $3.2 billion, while it moved into the black in China, making $78 million in the quarter after losing $87 million in its second-largest market a year ago.
The hike in GM’s 2023 forecast was made possible by reductions in capital spending as it focuses on its most strategic internal combustion engine and EV programs. It also is targeting what Barra called the company’s “highest impact growth initiatives,” including Cruise LLC, its self-driving car unit, as well as its BrightDrop EV fleet and software-defined vehicles.
GM said Cruise lost $611 million in the quarter and has cost the carmaker $1.2 billion so far this year.
(Updates with CEO comment from conference call in fourth paragraph, recasts lede.)
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