General Motors (GM) announced on Tuesday that it has withdrawn its 2023 profit outlook due to the rising costs of United Auto Workers (UAW) strikes. CEO Mary Barra also stated that the automaker will be slowing its electric vehicle (EV) strategy in order to prioritize profits over sales targets.
In the third quarter, GM’s net income decreased by 7.3% to $3.06 billion, while revenue rose by 5.4% to $44.1 billion. The adjusted earnings per share exceeded Wall Street expectations at $2.28, up from $2.25 the previous year, largely due to share buybacks.
The UAW strikes have had a significant impact on GM, costing the company $200 million in the third quarter and $600 million thus far in the fourth quarter. Strike costs are currently running at $200 million per week. Although the potential impact of new walkouts at GM’s most profitable North American factories remains uncertain, the strike impact was not unexpected.
As EV sales growth has slowed in North America, GM is revising its EV strategy and is scaling back efforts to challenge Tesla in the US EV segment. Barra stated that the launch of several EV models will be delayed and costs will be cut to improve profitability. They will also be using lower-cost lithium-iron batteries from China. GM is now abandoning their goal of building 400,000 EVs from 2022 to mid-2024.
GM’s decision to delay retooling a large factory in Michigan to build electric pickup trucks will save $1.5 billion in capital investments in 2024. The company is aiming to incorporate improvements seen in early-stage EV production to improve profit margins when the electric Silverados and GMC Sierras are manufactured.
GM has also joined other automakers in urging the Biden administration to reconsider strict emissions and fuel economy rules that aim to push EVs to comprise two-thirds of the US vehicle market by 2032.
While GM’s sales and pricing in North America have remained stable, the automaker’s cost-cutting efforts have only partially offset higher costs for EV launches, increased warranty expenses, and lower pension income in the quarter. Overall, these factors contributed to a $1.5 billion decrease in profits. GM’s Cruise robotaxi unit also widened its losses to $732 million in the quarter.
GM executives are concerned about rising interest rates and the conflict in the Middle East and how these factors could impact consumer behavior. However, they have noted that so far, consumers have remained resilient, as shown by stable average transaction prices for GM vehicles.
The company’s decision to withdraw its 2023 profit outlook and revise its EV strategy reflects the challenges faced by the auto industry due to labor strikes, increasing costs, and uncertain market conditions. GM intends to prioritize profitability and cost-cutting measures while adapting to the changing landscape of the EV market.