(New York) Automaker General Motors raised its 2023 guidance again in light of its second-quarter performance, despite uncertainties related to labor negotiations and the risk of market saturation for electric vehicles.
“I am delighted to share with you that General Motors’ operating results continue to show strong growth,” said Mary Barra, CEO of the American group in a letter to shareholders.
Revenue rose 25.1% year-on-year to $44.75 billion. Net income jumped 51.7% to 2.57 billion and, adjusted per share and excluding exceptional items (EPS) – benchmark for the markets –, it stands at 1.91 dollars.
This is better than the consensus of analysts.
The stock was up 0.51% in pre-opening New York Stock Exchange trading.
In early July, the group reported that 691,978 vehicles had been delivered in the second quarter in North America, up 19% from a year earlier. And 526,000 in China (9%) where the economic situation raised concerns for consumption.
As in the first quarter, GM’s forecast for 2023 has been revised upwards in particular EPS which is now expected between 7.15 and 8.15 dollars, against a range of 6.35 to 7.35 dollars previously.
It is counting on an annual net result of between 9.3 and 10.7 billion in 2023, against an anticipation of between 8.4 and 9.9 billion previously. It was 9.9 billion in 2022.
These forecasts assume that labor negotiations, which have just begun with the UAW and Unifor, will go smoothly and, most importantly, without a work stoppage.
“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,” Ms. Barra explained in her letter to shareholders. “Our focus this time will be no different,” she assured them.
For Garrett Nelson, analyst at CFRA, “the risk of a UAW strike that could begin as early as mid-September should cloud the short term as the two sides seem quite distant.”
He recalled that the 40 days of work stoppage in 2019 had cut EPS by $1.89.
GM said its second-quarter results were hit by a $792 million charge after it struck new commercial deals with LG Electronics and LG Energy Solution related to a 2021 recall of 142,000 Chevrolet electric vehicles due to faulty batteries.
The South Korean group had agreed in October 2021 to reimburse him up to 1.9 billion dollars. In the end, the American will therefore bear 792 million of the cost.
GM’s business once again benefited from U.S. consumer demand, which has been driving the industry up for two years, Barra said, noting that profitability was also growing internationally, particularly in Brazil and South Korea.
According to her, half of the buyers of the new Chevrolet Trax SUV in the United States and two-thirds in Korea were new customers for GM.
Regarding electric vehicles, the group said it had reached its goal of manufacturing 50,000 in North America in the first half and confirmed its target of 100,000 this year.
It wants to reach a production capacity of one million electric vehicles per year in North America by 2025.
“We remain cautious as GM’s results are weighted by its transition to electric vehicles and its ability to rapidly scale up its production infrastructure, and by demand for its electric models,” Nelson said.
He had already pointed out a few months ago that with more than a hundred models expected on the market by 2025, there was a “very high risk of market saturation” with a “price war” which should put pressure on margins.
