GM withdraws 2023 guidance as work stoppages take toll; UAW expands strike to GM SUV plant
GM did beat on both the top and bottom lines but said the UAW strike has cost $800 million so far.
Against the backdrop of bruising contract talks with the United Auto Workers (UAW), GM (GM) on Tuesday reported a third quarter revenue and profit beat but withdrew its 2023 guidance on labor strike uncertainty. And following the earnings release, the UAW stepped up its stand-up strikes against another GM plant.
GM CFO Paul Jacobson said the company was pulling its previously announced profit guidance of $12 billion to $14 billion in EBIT (earnings before interest expense and taxes) and net income attributable to stockholders of between $9.3 billion and $10.7 billion.
For the third quarter, GM reported top-line revenue of $44.13 billion (vs. $43.01 billion estimated), a 5.4% gain from a year ago. On the profitability front, GM reported adjusted EPS of $2.28 a share (vs. $1.84 expected), on net income of $3.06 billion.
Jacobson also said the labor strikes, which started in mid-September, have cost the automaker roughly $800 million in pre-tax earnings due to lost vehicle production, including $200 million during the third quarter.
And only a few hours after the release of those earnings, the UAW called up 5,000 workers from GM's Arlington, Texas, full-size SUV plant to go on strike. Those workers build GM's highly profitable SUVs like the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade. In a statement released following the latest strike, GM said it was "disappointed by the escalation of this unnecessary and irresponsible strike," and that it had increased its latest offer by "approximately 25% in total value."
In addition to striking at GM plants Arlington, Texas., Wentzville, Mo., and Lansing, Mich., the UAW is striking at all GM parts and distribution centers, crippling the automaker’s ability to service customers’ cars and provide parts to other assembly plants.
GM is also moderating its electric vehicle investments in the face of the strikes and shifting EV sentiment. Last week, GM said it was delaying its EV truck expansion, pushing back the conversion of an EV truck plant to late 2025 in order to "better manage capital investment while aligning with evolving EV demand."
"We are also moderating the acceleration of EV production in North America to protect our pricing, adjust to slower near-term growth in demand, and implement engineering efficiency and other improvements that will make our vehicles less expensive to produce, and more profitable," CEO Mary Barra said in her shareholder letter.
GM has committed to spend $35 billion by 2025 for its electrification plans, with a goal of being all-electric by 2035. With the automaker admitting "evolving EV demand" has led it to delay its EV expansion plans, GM says it plans to hit an annual EV capacity of 1 million units in North America by the end of 2025 and is targeting "low to mid-single-digit EBIT EV margin in 2025."
While labor strife and a potential EV slowdown may be hurting GM’s profitability, the Detroit-based automaker is still selling cars at a brisk pace. GM said it delivered 674,336 vehicles in the US in the third quarter, up 21% from a year ago, driven by strong sales of trucks and SUVs.
Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
Read the latest financial and business news from Yahoo Finance