General Motors Co. on Tuesday reported that its adjusted pretax earnings rose 37% to $4.4 billion for the second quarter of 2024. In a letter to shareholders, the company’s CEO, Mary Barra, attributed the results to strong sales of gasoline-powered pickup trucks and SUVs, improved sales of electric vehicles and stable pricing with low incentives.
GM said it is raising its full-year profit outlook based on the strong performance, saying it now expects pretax profit of $13 billion to $15 billion for the year, up from its previous outlook of $12.5 billion to $14.5 billion.
The company also announced that it would halt production of its Cruise Origin self-driving bus-like vehicle, which was assembled at its Factory Zero in Detroit and Hamtramck, until 2019. GM has temporarily halted production November 2023.
Barra said GM’s self-driving subsidiary Cruise will “focus on the next-generation Chevrolet Bolt, rather than Origin,” as its next self-driving vehicle. “This will allow us to address the regulatory uncertainty we faced due to Origin’s unique design. Additionally, the significantly lower cost per vehicle will allow Cruise to optimize its resources.”
GM booked a $600 million loss due to the discontinuation of Origin, Chief Financial Officer Paul Jacobson told reporters. It has not yet been decided where the Cruise version of the Bolt will be assembled, but Jacobson said it will likely be at the Fairfax Assembly Plant in Kansas. GM has said the new Chevrolet Bolt, which will use its Ultium propulsion system, will be built in Fairfax.
When asked if GM might bring back Origin at some point, Jacobson replied, “Maybe. The future is uncertain. We’re really focused on the Bolt.”
Finally, Jacobson said GM will restructure its operations in China, as the company has struggled to make significant profits there in recent years.
“We have taken steps to reduce inventory, align production with demand and reduce fixed costs, but it is clear that the steps we took, while important, were not sufficient,” Jacobson said. “We are working closely with our (joint venture) partners to restructure our business in a way that does not require additional capital to ensure profitability and sustainability.”
GM’s second quarter results
GM said total revenue for the quarter rose 7.2 percent to $48 billion. Net income rose 14.3 percent to $2.9 billion from $2.6 billion. Year-over-year basisr.
Barra told shareholders that “better execution” will continue to benefit GM, which is launching eight new or redesigned compact, midsize and full-size gasoline SUVs in North America this year, all with higher margins than their predecessors. In the fourth quarter, GM’s sales increased 0.6% to 696,086 vehicles, its best quarterly sales since the fourth quarter of 2020. Approximately 22,000 EVs have been delivered. In the second quarter.
“To unlock the next cycle of EV growth, we are expanding production of the Chevrolet Equinox EV, which offers a unique combination of performance, technology, range and affordability,” Barra wrote.
Jacobson said GM is ramping up production of the Equinox EV, which is built at the Ramos Arizpe assembly plant in Mexico, to help get the vehicles to customers faster. GM plans to launch new electric vehicles later this year: the GMC Sierra EV pickup, the Cadillac Optique, the Cadillac Escalade IQ and the hand-built Cadillac Celestique.
GM plans to spend about $400 million more on marketing for new vehicle introductions in the second half of the year than it did in the first half, but that amount is still lower than past marketing spending as the company continues to control costs, Jacobson said. GM does not disclose its marketing budget.
“While we are excited about our EVs and early success, we remain focused on disciplined volume growth, which was key to achieving positive floating gains from the portfolio in the fourth quarter and remains our goal,” Barra said.
Variable profit is when the revenue GM makes from selling a vehicle exceeds the direct production costs of the vehicle. The calculation does not include corporate and fixed costs.
In China, where EV adoption is already rapid, GM continues to face challenges and reported a loss of $104 million in the quarter, compared with a profit of $78 million a year ago.
GM’s credit arm, GM Financial, reported adjusted pretax income rose to $822 million from $766 million a year ago.
First Half Results
GM reported that pretax adjusted earnings rose 18 percent to $8.3 billion in the first half of the year. Net income to shareholders rose 19.2 percent to $6 billion. Total revenue increased 7.4 percent to $91 billion.
Net income attributable to shareholders increased 19.2 percent to $6.0 billion. GM Financial adjusted pre-tax income increased 1.4 percent to $1.6 billion.
GM China’s equity earnings were a loss of $210 million, compared with a profit of $161 million in the same period last year.
Overall, Wall Street reacted positively to the results, with GM shares up 1.26% to $49.56 as of around 8:15 a.m. Tuesday.
“We believe GM’s long-awaited turnaround is underway with Barra & Co. driving a return to growth (in the second half and through 2025) with increased focus on margins and capital efficiency while stabilizing pricing across the portfolio,” Dan Ives, managing director and senior equity analyst at Wedbush Securities, told the Free Press in an email. “Importantly, GM announced it would pause production of Cruise Origin autonomous vehicles, which will come as a relief to investors but also represents a $600 million charge to the troubled division.”
GM pricing to come
GM said the average transaction price during the quarter was about $50,000, and incentives were 1.5 percent below the industry average.
Jacobson said GM’s pricing has remained consistent, thanks in large part to lower incentives and a wider variety of trim levels. He also said average transaction prices are slightly lower than a year ago as changes in GM’s vehicle mix have resulted in more lower-priced Chevrolet Trax subcompact SUVs, lowering the average transaction price. But “for full-size trucks and SUVs, pricing is holding,” he said.
Jacobson said prices could fall by 1 to 1.5 percent in the second half of the year, but that demand would ultimately dictate prices.
“We work month by month, quarter by quarter, trying to bring products to market that our customers love,” Jacobson said.
Possible change in plans for GM’s Lansing battery plant?
Ultium Cells LLC, a joint venture with LG Energy Solutions, currently has two battery cell factories that supply batteries for GM’s EVs, one near Lordstown, Ohio, and one in Spring Hill, Tenn. Ultium Cells is building a third factory in Lansing that is expected to start operating later this year and create about 1,700 jobs.
Last year, G.M. Northern Indiana site selectedThe company is building its fourth battery cell factory near the Michigan border. The new factory will A joint venture was established The deal was signed between GM and South Korea’s Samsung SDI. The plant is scheduled to open in 2026 and is expected to create 1,700 jobs.
But in June GM has scaled back its production targets GM said it will cut production of new EVs this year to 200,000 to 250,000 from 200,000 to 300,000 due to slowing demand for EVs. Asked whether GM still plans to open the two factories as planned or whether it might cancel one because of slowing EV adoption, Jacobson said GM is making good progress with battery cell production and will follow customer guidance.
“If you look at our decisions to defer some of our capital or delay some of our investments, we’re going to continue to follow our customers’ lead,” Jacobson said. “We’re rapidly expanding our (battery) cell fabs number one and number two, which has played a big role in helping us achieve floating margin profitability as cell costs continue to fall, and LG is a big part of that.”
Asked directly again whether either the Lansing or Indiana plants would be put on hold or canceled, Jacobson said, “Ultimately, there’s nothing I can comment on at this time. We’re focused on expanding in Spring Hill and continuing to operate Lordstown efficiently. We’re very happy with the economies of scale we’ve achieved there and we look forward to continuing to expand our portfolio.”
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