Powered by a strong first half of 2023, including second-quarter earnings that beat expectations, General Motors Co. is again raising its operating profit guidance for the year, this time by $1 billion.
The Detroit automaker now expects to bring in $12 billion to $14 billion in operating profit, up from the $11 billion to $13 billion guidance announced during first-quarter earnings, which was an increase from a previous outlook of $10.5 billion to $12.5 billion. GM’s net income is expected to be $9.3 billion to $10.7 billion, up from the previous outlook of $8.4 billion to $9.9 billion.
For the first half of 2023, GM’s net income was up 7% year over year at $4.9 billion on revenue of $84.7 billion, which was up 18%, including second-quarter net income of $2.5 billion.
GM CFO Paul Jacobson noted in a call with reporters that the automaker’s “guidance assumes that we successfully negotiate new labor agreements (with the United Auto Workers) without a work stoppage.” GM and the UAW kicked off negotiations last week.
In a Tuesday note to shareholders, CEO Mary Barra addressed the labor negotiations with the UAW and Unifor, the union representing Canadian autoworkers: “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. That’s the best possible outcome for all our key stakeholders, including our team, plant communities, dealers, suppliers and investors.”
GM previously announced a $2 billion cost-savings program, but is now aiming to save $3 billion through 2024, Jacobson said. The automaker is reducing costs by lowering its salaried workforce headcount, removing vehicle complexities, cutting spending in sales and marketing, and lowering administrative and travel costs.
The automaker offered a buyout program to most of its salaried employees earlier this year and approved about 5,000 applications for that program, enabling the automaker to achieve about $1 billion of cost savings.
Jacobson said the further $1 billion in cost savings GM’s targeting “doesn’t contemplate any additional reductions beyond what I would consider to be normal attrition.”
“We remain well positioned for the future,” Jacobson said. “We’re focused on profitability. Our recent results demonstrate that we’re not sacrificing margin for volume. We will continue this strategy to help drive a fundamentally stronger company beyond 2023.”
GM’s second-quarter net income of $2.5 billion was up 52% year-over-year on revenue of $44.7 billion, which was up year-over-year. GM’s operating profit for the quarter was $3.2 billion, up 38% year-over-year.
GM’s results were affected by a $792 million charge related to the 2021 mass recall of electric Chevrolet Bolts. GM battery supplier LG Electronics Inc. previously agreed to pay $1.9 billion for the recall costs but the automaker says it’s now covering some of that cost as part of new agreements it has with LG Electronics and LG Energy Solution.
“The charge reflects the conscious decision we made during the Chevrolet Bolt EV and Bolt EUV 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,” Barra wrote in a letter to shareholders.
GM recalled more than 141,000 electric Bolts for potential fire risk. Some owners received software updates to fix the issue while others were offered a battery module replacement. GM has replaced 85,000 batteries, representing more than 80% of the total affected, the automaker said.
GM’s net income margin for the second quarter was 5.7%, up from last year’s 4.7%. Pre-tax earnings in GM North America totaled $3.1 billion in the quarter for a 39% year-over-year increase. GM International’s pre-tax earnings were $236 million for the second quarter of this year, up 13% from last year’s second quarter.
Earlier this month, the Detroit automaker reported a 19% year-over-year increase in its second-quarter auto sales. This is a breakout year for GM’s EVs, with electrified versions of the Silverado, Blazer and Equinox all launching. GM is aiming to produce 100,000 EVs in North America this year, and reached 50,000 in the first half.
