DETROIT (AP) — Despite taking on a large chunk of a costly electric vehicle recall, General Motors posted $2.54 billion in net revenue in the second quarter, up 52% from a year earlier.
Continued strong vehicle sales and pricing, as well as cost cuts, led to a better-than-expected quarter. The Detroit automaker on Tuesday raised its full-year financial guidance on one condition: It can negotiate union labor contracts without a strike.
Chief Financial Officer Paul Jacobson told reporters that customers paid about $1,600 more per vehicle last quarter than they did in January through March, with an average US sale price of $52,000. Discounts and inventory held steady as the company sold 19% more vehicles than a year ago in the US, its most profitable market.
“We have had the ability, the will and the ability to remain disciplined in our pricing and incentives,” Jacobson said. “So while a lot of our competitors are moving prices a lot, ours have been very consistent,” reflecting strong consumer demand, he said.
GM raised its guidance for the full year for the second straight quarter, saying it will post net income of between $9.3 billion and $10.7 billion. It previously predicted $8.4 billion to $9.9 billion.
It also boosted the guidance for another $1 billion in cost savings that Jacobson said GM had found, on top of the $2 billion the company previously promised for the full year. The savings came through lower salaried employee expenses due to 5,000 workers accepting acquisitions, as well as marketing savings and reductions in administrative costs and vehicle manufacturing complexity.
The company took a one-time charge of $792 million as it took on more than the $1.9 billion cost of the recall of Chevrolet Bolt electric vehicles because they could catch fire due to battery manufacturing defects.
Jacobson said GM took extraordinary measures to care for Bolt owners by allowing them to trade in their cars and offer vehicles on loan until the provider, LG Energy Solution, had replacement batteries available. The recall announced in 2021 covered around 142,000 vehicles.
Excluding one-off items, GM said it earned $1.91 a share, beating Wall Street’s estimate of $1.87. Revenue of $44.75 billion far exceeded analysts’ estimate of $42.13 billion, according to data provider FactSet.
The company also said it met an internal goal of producing 50,000 electric vehicles in North America in the first half of the year. With battery cell production and vehicle assembly increasing, GM now expects to build around 100,000 EVs in the second half of the year.
GM has set a goal of making only electric passenger cars by 2035. It has committed to having 30 electric vehicle models on sale worldwide by 2025.
GM also said the cost savings allowed it to lower the upper end of its capital spending projection this year. The company now expects to spend $11 billion to $12 billion, down from $11 billion to $13 billion.
Hitting the numbers in its financial forecast may be difficult because the company is in the midst of what is expected to be contentious negotiations with autoworkers in the US and Canada.
United Auto Workers President Shawn Fain, who represents some 43,000 U.S. factory workers, has told members they are prepared to make big gains in contract negotiations this year, but they must be prepared to strike against profitable auto companies.
The contracts between the three Detroit automakers and GM, Stellantis and Ford expire at 11:59 pm on September 15.
Fain says the union wants increases in the cost of living and overall wages, an end to the tiers of workers earning different wages, the restoration of pensions for all workers and other items. The company is wary of increasing its spending as it ramps up to spend billions developing electric vehicles.
Chief Executive Officer Mary Barra said the company has a long history of negotiating fair contracts. “Our goal this time is no different,” she wrote.