GM earnings soar
New York CNN —
General Motors reported its second-quarter earnings surged 59%, and the company raised its full-year profit outlook.
The company said its adjusted earnings reached $2.7 billion, or $1.91 a share. That’s up from the $1.7 billion it reported a year earlier. Analysts surveyed by Refinitiv had been forecasting earnings per share of $1.85 in the quarter.
The company also said it now expects to earn between $9.3 billion to $10.7 billion for the full year, significantly higher than its previous outlook of earnings between $8.4 billion $9.9 billion.
Those earnings forecasts could be derailed though if the company is hit with a strike by the United Auto Workers union. The current labor pact expires September 14, and talks are already off to a contentious start.
UAW President Sean Fain said the union is prepared to strike if the company does not meet its demands. A six-week strike against GM in the last round of talks in 2019 cost the company a reported $2.9 billion.
The strong earnings and profit outlook could pose a challenge for GM at the negotiating table by prompting the union to take an even harder line in its demands. The union is on record wanting to end a lower-cost wage and benefit tier for some of its hourly employees and a return to cost-of-living adjustments to protect workers from inflation pressures.
But this is a good time for automakers – and the union knows that. Demand for vehicles remains strong and prices are at or near record levels. GM’s global vehicle sales rose 12% to 1.6 million vehicles, and its revenue increased even more, rising 25% to $44.7 billion, topping forecasts by $2.1 billion.
“The biggest driving force behind our financial results is customer demand for our vehicles,” said CEO Mary Barra in a letter to employees.
GM also faces a September contract expiration with Unifor, which represents hourly workers at it Canadian plants. Barra took a moment during her call with investors to thank members of both unions. “There’s a direct connection between their hard work and our success,” she said. And she pledge to reach new deals with both unions.
“We have a long history of negotiating fair contracts. That’s the best possible outcome for all,” she said. “We look forward to constructive talks.”
The company took a $792 million charge related to a recall of its Chevy Bolt to replace its EV battery, due to the fire risk posed by the electric car. LG, the company’s battery supplier had already agreed to pay GM $1.9 billion to cover most of the cost of the recall. The latest charge reflects a change in that agreement with LG.
“The charge reflects the conscious decision we made during the … recall to serve our customers in ways that go beyond traditional remedies, and we are taking new steps that will reduce GM’s costs and improve our EV margins over time,” said Barra. GM replaced the expensive EV batteries in the recalled Bolts.
The company hit its target of 50,000 EV sales in North America in the first half of the year and is on track to produce 100,000 EVs for the market in the second half of the year. But that is still a fraction of its overall deliveries, as it sold a total of 1.5 million vehicles in North America in the first half.
Shares rose in premarket trading.
Source: CNN
