DETROIT, July 26 (Reuters) – General Motors Co (GM.N) on Tuesday reaffirmed its full-year profit outlook on an expected surge in demand and said it was curbing spending and hiring ahead of a potential economic slowdown, but a 40% drop in its quarterly net income disappointed, sending shares lower in premarket trading.
The Detroit automaker’s net income fell 40% in the second quarter from a year earlier due to supply-chain snarls including a global semiconductor chip shortage, sending its shares down about 3% in premarket trading.
In a shareholder letter, Chief Executive Mary Barra said the company was “already taking proactive steps to manage costs and cash flows” ahead of a possible slowdown in the economy.
“We have also modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” she added.
The company has taken steps to offset a surge in inflation and other challenges, Chief Financial Officer Paul Jacobson said.
“We’ve slowed down some hiring (and) we have put off some costs and expenses we were going to make going into this year to try to balance that out with the pressure we’ve seen from both inflation as well as some of the other supply-chain challenges,” Jacobson told reporters on a conference call, adding that GM was not contemplating layoffs.
The automaker reaffirmed its forecast of full-year net income of $9.6 billion to $11.2 billion, and adjusted EBIT of $13 billion to $15 billion, while expecting global deliveries to be up sharply in the second half of the year.
Second-quarter net income was $1.7 billion, or $1.14 a share, down 40% from $2.8 billion, or $1.90 a share, a year earlier. Analysts had expected $1.20 a share, according to Refinitiv data. Revenue rose nearly 5% to $35.8 billion.
GM said net operating cash in the quarter dropped to $3.1 billion, from $7.2 billion a year earlier, while net income margin fell to 4.7%, from 8.3% in last year’s quarter.
GM said average transaction prices jumped $6,600 per vehicle in the quarter, and noted that U.S. dealer inventories remain historically low, at 10 to 15 days’ supply.
While the automaker is spending more to ramp up its electric vehicle and battery operations, GM’s projected EV volume over the next two years lags that of Ford Motor Co (F.N), which expects to build 600,000 EVs in 2023. GM said it plans to build 400,000 EVs in North America “over the course of 2022 and 2023.”
GM’s China operations lost $100 million in the quarter due to the COVID-19 restrictions there. The last time GM in China reported a quarterly loss was in early 2020, at the start of the pandemic.
GM’s quarterly revenue in China fell to $6.1 billion, from $9 billion in the first three months and $9 billion in the year-earlier period. Deliveries to dealers fell to 473,000, from 602,000 in the first quarter and 620,000 a year ago.
GM said Tuesday that it had binding agreements securing all the electric vehicle battery raw materials needed to support its plan for annual capacity of 1 million vehicles in North America in 2025. read more
