Vehicle demand exceeds GM expectations
• Company’s forecast-beating profit estimates stem from rising US sales, even with higher interest rates
General Motors (GM) beat firstquarter profit estimates and raised its full-year earnings and cash flow guidance after vehicle demand at the start of the year surpassed expectations.
Its shares rose in premarket trading.
GM made $2.21 a share in adjusted profit in the first quarter, compared to a consensus forecast of $1.72 a share.
Revenue rose 11% to $39.99bn, it said on Tuesday, which was more than the $39.24bn analysts expected.
The stronger results stem from rising sales in the US, even in the face of higher interest rates and inflation. GM executives said demand was strong enough to revise 2023 guidance upward, boosting profit estimates for the year by $500m to $11bn-$13bn.
“We did it with strong production and inventory discipline and consistent pricing,” GM CFO Paul Jacobson said. “We’re feeling confident about 2023.”
FREE CASH FLOW
The Detroit carmaker raised per-share full-year guidance to between $6.35 and $7.35, up from $6-$7 a share, and said free cash flow would also increase by $500m to a range of $5.5bn-$7.5bn.
GM’s shares pared a gain of as much as 4.4% before the start of regular trading on Tuesday, rising 3.5% to $35.50 at 6.55am in New York. The stock was up 1.9% for the year as of the close on Monday.
The carmaker’s sales were particularly strong in North America, where first-quarter earnings rose before interest and taxes rose to $3.6bn.
Vehicle sales rose 18% to 707,000 in the region.
Jacobson said the company originally expected to sell 15million vehicles in the US in 2023, slightly less than the 15.5million annualised rate carmakers foresaw in the first quarter.
North American demand was enough to offset a weak performance in China, GM’s second-largest market. The carmaker continues to struggle in the country, where its vehicle sales fell 25% to 462,000 vehicles in the quarter. Profits from its joint ventures in the market slumped 65% to $83m.
The market has struggled overall in the wake of Covid-19 restrictions and foreign carmakers have had to overcome a
GM ON TARGET TO SELL 150,000 ELECTRIC VEHICLES IN 2023, SAID CFO PAUL JACOBSON
growing preference for Chinese brands by competing on price, squeezing profit margins.
The situation in China probably will not significantly improve until the second half of the year, according to Jacobson.
GM remained on target to sell 150,000 electric vehicles in 2023, the CFO said. About 70,000 of them will be Chevrolet Bolt and Bolt EUV compacts and 80,000 will be larger models built using their new Ultium battery pack. Those include the Hummer pickup, Chevy Silverado pickup and Chevy Blazer and Equinox SUVs.
GM’s Cruise self-driving car unit nearly doubled its loss in the quarter to $561m. /
Bloomberg