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General Motors Co.’s profit surged 60% from a year ago, easily beating Wall Street’s expectations on strong demand for gas-powered trucks in the US.
The automaker earned $3.06 a share on an adjusted basis in the second quarter, up from $1.91 a year ago, according to a statement Tuesday. That compared with the $2.71 average of analyst estimates compiled by Bloomberg. The company also raised its earnings guidance by $500 million to as much as $15 billion for this year.
The automaker’s stronger-than-expected performance comes mostly from its US business, where demand for pickup trucks and SUVs — along with a slowdown in sales growth of electric vehicles that lose money at current volumes — has enabled GM to maximize profits and cash flow. The Detroit-based manufacturer is delaying some of its investments in EV plants and stock buybacks have reduced the share count by 17%.
Record revenue in the quarter and first half of the year “has paved the way for us to increase our guidance for full-year earnings, free cash flow and earnings per share,” Chief Executive Officer Mary Barra said in a letter to shareholders.
Simply put, GM is operating as a gasoline-fueled cash generator rather the high-tech growth machine Barra had once envisioned. Taken together, the business-as-usual nature of the US vehicle market is boosting profitability that easily offsets its struggling business in China, which continues to lose money.
While truck profits are the main driver of earnings growth and cash flow, GM has also delayed expansion plans for EV production and reduced capital expenditures from as much as $13 billion in past years to range of $10.5 billion to $11.5 billion for this year.
Shares of the automaker fell 6.3% to $46.42 as of 9:58 a.m. in New York. The stock is up about 29% this year.
In North America, adjusted earnings before interest and taxes grew about 39% to $4.4 billion.
The company’s $48 billion in revenue in the quarter rose 7% from a year ago and beat the consensus estimate of $45.6 billion. A key driver was a nearly 5% rise in sales of GM’s full-size Chevrolet Silverado and GMC Sierra pickup trucks.
EV Rethink
GM didn’t address reports that the company has delayed its third battery cell plant that’s planned with LG Energy Solution. Barra said recently that the company won’t hit its goal of having production in place for 1 million EVs at the end of 2025.
The company feels it can slow its push into EVs because a lot of its investment in battery production has been made. By the end of next year, the company will have a bigger lineup of EVs than any automaker in the market. GM is already selling electric versions of the Chevrolet Silverado pickup and the Blazer midsize crossover SUV and smaller Equinox.
Later this year, GM plans to add an electric version of its flagship Cadillac Escalade and a GMC Sierra pickup plug in. A new Bolt compact EV comes out next year, along with a three-row Cadillac crossover called the Vistiq.
The Bolt will take on new importance for GM. When the small EV comes out next year, it will be the self-driving car employed by Cruise LLC, the automaker’s autonomous vehicle unit. Barra said in her letter that GM will shelve the purpose-built Origin autonomous vehicle, a bread box-shaped shuttle that was designed for four to six passengers. She said it will be mothballed for cost and regulatory reasons.
Cruise lost $483 million on an operating basis in the most recent quarter, down from $611 million a year ago. The unit also took a $583 million one-time adjustment for restructuring and for costs related to shelving the Origin. The CEO said GM plans to look for a fresh infusion of captial into Cruise from outside sources this year — and has expressions of interest.
“We have significant outside interest from a partner and investor perspective,” Barra told analysts on a conference call.
While cash flow remains strong from the North American business and EV plans are moving ahead slowly, GM continues to struggle in China. The company lost $104 million there in the second quarter after making $78 million a year ago.
GM Chief Financial Officer Paul Jacobson said the company is talking to its Chinese partners to restructure the business.
“We’re continuing to see challenges,” he said on a call with reporters. “We’ve seen significant market share erosion and it’s price competitive.”
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