GM, Ford count on petrol-powered vehicles
UNITED States carmakers
General Motors (GM) and Ford face a challenge in common when they report first-quarter results: Explaining to investors where profit growth will come from in the months ahead as electric vehicle (EV) growth slows.
The slowdown in global EV demand, intensifying competition from Chinese carmakers and high US borrowing costs have forced the carmakers to delay investments and ratchet down costs over the past 12 months.
With China’s economy slowing and US inflation running hot, a macroeconomic growth boost looks a long way off.
That has companies like GM and Ford focusing on sales of their core petrol-powered vehicles, from which they derive most of their profit.
GM chief executive officer Mary Barra will get a lift from strong demand for the carmaker’s highly profitable Chevrolet and GMC brand pickup trucks and sport utility vehicles (SUVs).
GM chief financial officer (CFO) Paul Jacobson said the year was off to a good start and the company felt positive about where demand was trending, while Ford CFO John Lawler, in reaffirming the company’s full-year profit outlook, said vehicle prices were holding up better than expected.
Legacy US carmakers, which rely heavily on sales of large trucks and SUVs, have been bogged down by higher expenses related to electrifying their vehicle lineups and bumpy demand for battery-electric vehicles.
Evercore ISI analyst Chris McNally said in a research note that the momentum had shifted for the previous winners like Tesla as growth in EV sales slows. Investors had refocused instead on GM, Stellantis, Toyota and others that rely less on EVs, he added.
The high ratio of gas-burning trucks to EVs in GM’s North American sales mix will help offset a projected loss in the carmaker’s operations in China. GM said first-quarter US vehicle sales slipped 1.5 per cent on lower commercial-customer deliveries, but retail sales jumped six per cent.
Barra has yet to outline specific plans for restructuring GM’s China business. Last year, GM delivered 2.1 million vehicles in China, down almost half from the 4.04 million it reported in 2017.
Meanwhile, investors want an update at GM’s struggling Cruise robotaxi unit.
Barra has not said how GM will fund relaunching and rebuilding the business after a serious accident forced the company to halt driverless ride operations.
GM has said it will slash spending by US$1 billion this year at Cruise. The unit has lost more than US$8 billion since GM acquired it in 2016.
Cruise said on April 9 it would put some vehicles back on the road in Phoenix, Arizona, with human drivers.
Ford, too, is getting power from its combustion truck business, as well as its Ford Pro commercial vehicle operations. The carmaker reaffirmed its forecast for US$10 billion to US$12 billion in core profit this year.
It said earlier last month it would slow two major EV programmes.
CFO Lawler told an investor conference that future EV investments would not go forward unless they could “stand on their own” to show a profit.