In the wake of rising costs related to the United Auto Workers strike, General Motors withdrew its previous guidance for 2023 profits and near-term electric vehicle production. The withdrawal came after UAW cost jumped to $200 million a week during October.
The automaker's September quarter's net income dropped by 7.3% to $3.06 billion, while revenue rose 5.4% to $44.1 billion. GM shares were up 1.6% in premarket trading after the stronger-than-expected profit.
The downgrading of growth guidance didn't come as a surprise for analysts who were expecting UAW to impact GM's earnings. Along with rising toll of the UAW strikes, possibility of higher labour costs, rising warranty expenses and uncertain macro-economic outlook also played their roles in GM's withdrawal in targets.
The UAW walkouts cost the company $200 million during the third quarter and $600 million so far in the fourth quarter, GM Chief Financial Officer Paul Jacobson said in a briefing with reporters.
General Motors Chief Financial Officer Paul Jacobson siad that the strikes are now costing the company around $200 million a week. The slow pace of EV sales growth in the North America has become a major cause of concern of automakers. Even, industry leader Tesla also expressed caution over the pace of its expansion. At this time, GM is shifting its EV strategy in the region. The automaker will now boost its production to meet customer demand and hit profit targets, rather than focusing on specific sales volume targets.
GM is abandoning a goal of building 400,000 EVs from 2022 through mid-2024. To manage its cost and boost profit, the company also postponed its expansion plans and production goals. GM announced to delay retooling of a large factory in Orion Township, Michigan. GM's decision to delay the retooling to build electric pickup trucks will save $1.5 billion in capital investments in 2024, he said.
The delay to the electric truck expansion "will actually allow us to incorporate some of the changes and improvements that we've seen in early-stage production" and improve profit margins when the electric Silverados and GMC Sierras start production, he said.
The company, along with other automakers is requesting the Biden administration to back away from ambitious emissions and fuel economy rules aimed at pushing EVs to two-thirds of the US vehicle market by 2032.
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