GM Increases Full-Year Guidance, Announces Deeper Cost Cuts

(CTN News) – In its second-quarter results, GM raised its 2023 guidance for the second time this year.

In addition to cutting costs, Detroit’s automaker said it plans to cut $3 billion in expenditures next year instead of $2 billion.

CFO Paul Jacobson said the cuts will include sales and marketing, salaries, and other expenses.

Shares of GM rose nearly 2% in premarket trading.

Here’s what GM said about its second quarter:

Earnings per share: $1.91. It’s not comparable with analysts’ expectations of $1.85.

According to Refinitiv consensus estimates, revenue will be $44.75 billion, up from $42.64 billion

GM’s earnings include an unexpected $792 million charge from LG Electronics and LG Energy Solution. Previously, LG was supposed to pay the recall costs for its Chevy Bolt EV models, but the automaker shared them with the companies.

The company reported adjusted earnings before interest and taxes of $3.23 billion, or $1.91 per share.

Unadjusted, the company made $2.57 billion, or $1.83 per share, up nearly 52% from $1.69 billion a year ago.

From $35.76 billion a year earlier, revenue jumped 25%.

For the full year, GM is expecting adjusted earnings between $12 billion and $14 billion, up from $11 billion to $13 billion previously.

GM also raised expectations for adjusted automotive free cash flow to a range of $7 billion and $9 billion, up from $5.5 billion and $7.5 billion, and for net income attributable to stockholders of $9.3 billion to $10.7 billion, up from $8.4 billion to $9.9 billion before.

Price, demand, and capital discipline were stronger than expected, Jacobson said.

The guidance raise depends on GM negotiating new labor agreements with the United Auto Workers and Canadian Unifor unions without a work stoppage or strike.

Compared with previous union officers, the new UAW leadership has been a lot more confrontational. The current contracts covering roughly 150,000 union workers for Detroit automakers expire Sept. 14.

“We’ve negotiated fair contracts with both unions that reward our employees and support the long-term success of our company.

Mary Barra, the CEO of General Motors, wrote a shareholder letter Tuesday. All our key stakeholders, including our team, plant communities, dealers, suppliers, and investors, will benefit from that.”

It would only add to the auto industry’s long-term production problems caused by the Coronavirus pandemic and significant supply chain constraints.

The work stoppage could cost GM hundreds of millions a week and delay the ramp-up of electric vehicles, which the automaker has already been slow to produce.

“It’s been a little challenging,” Jacobson acknowledged, but GM produced 50,000 EVs in North America in the first half of the year.

A discussion of the automaker’s new production problems with electric vehicles will take place on Tuesday.

Bespoke has reported that GM’s earnings beat expectations 86% of the time prior to its earnings announcement on Tuesday. On earnings days, however, the stock averages a gain of only 0.17%.

GM shares are up approximately 16% this year. Monday’s closing price of $39.30 was down from February’s 52-week high of $43.63.

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