New York (AFP) – General Motors raised its full-year profit forecast on Tuesday after reporting solid quarterly results on strong vehicle pricing that offset a hit from costs tied to winding down electric vehicle investments. The big US automaker reported $1.3 billion in profits, down 31 percent from the year-ago period. Revenues rose almost two percent to $48 billion.
North American auto sales fell during the period, although strong pricing translated into higher profit margins. The company said results in North America — by far its biggest market — were boosted by “record” sales of full-sized pickup trucks. Fleet sales were also strong, supported by robust demand from commercial and government customers. GM executives highlighted strong demand for its vehicle in its core US market, as well as company initiatives to diversify into new businesses including insurance and defense.
GM pointed to an anticipated US Army order of 10,000 infantry squad vehicles after an initial order of 1,200 vehicles. Defense revenues are expected to grow to almost $700 million in 2026, Chief Executive Mary Barra said on a conference call with analysts. Businesses like defense and insurance are “small now” but have potential to grow, “improve margins and become less cyclical,” Barra said.
But results were dented by $2.3 billion in costs related to GM’s EV retreat following shifts in US environmental policy under President Donald Trump. GM also accounted for $177 million in China restructuring costs. Executives also cited costs from moving production to the United States due to Trump’s trade policies favoring tariffs. The company expects lower sales of some top-selling vehicles in the second half of the year as it prepares to launch rebooted full-sized 2027 pickup truck models.
Chief Financial Officer Paul Jacobson said consumers have been “very resilient,” with the company observing no shifts in vehicle preference due to higher gasoline prices resulting from the US-Iran war. “I think it takes a much longer time period before we would see any impact,” Jacobson told CNBC. On Monday, US gasoline prices rose back above $4 a gallon, according to the American Automobile Association, reflecting renewed fighting in the Middle East.
– Trade tensions –
GM maintained its full-year projection of between a $2.5 billion and $3.5 billion hit from US tariffs enacted by Trump. On Monday, Trump ordered new 50-percent tariffs on many Canadian goods, citing among other things, Canada’s “discriminatory” levies on US items including cars. A White House fact sheet said the new US tariffs will cover “products ranging from wine to hockey sticks to cement.” The move comes as the two countries, along with Mexico, are negotiating a revised trade agreement among the neighboring states.
Jacobson described the trade accord as a priority, saying “we’re confident that the governments will be able to work through it.” GM lifted its 2026 forecast for pre-tax operating earnings to a range of $14 billion to $16 billion, up a half billion from the prior level. The projection “assumes no material escalation in the Middle East” and no significant jump in commodity costs, according to a slide. GM said the increased 2026 profit outlook in part reflects “slightly better” dynamics in terms of commodity costs. The company anticipates 2027 results to be “better” than this year’s, due in part to increased supply of top-selling sport utility vehicles.
Shares of GM jumped 3.5 percent in morning trading.
© 2024 AFP
