General Motors withdraws its 2023 guidance, UAW strikes SUV plant

General Motors on Tuesday withdrew its 2023 profit outlook just ahead of a new United Auto Workers walkout at one of its most profitable factories.

With the UAW clash throttling revenue and profits, Chief Executive Mary Barra told investors the automaker will slow its electric vehicle strategy to put profits ahead of sales targets.
 

United Auto Workers President Shawn Fain ordered a walkout at the automaker's Arlington, Texas, factory, which builds highly profitable Cadillac Escalade, Chevrolet Suburban and other large SUVs. The move came less than four hours after GM posted better-than-expected third quarter results.
 

The UAW's move to shut down one of GM's most profitable plants will push the weekly cost of the union's strikes well above the $200 million-a-week rate GM executives outlined for investors earlier Tuesday.
 

GM's third quarter results beat expectations. Fain pointed to that as a cause for the UAW to increase pressure on the company to improve its contract offer, which currently includes a 23% wage increase over 4-1/2 years.
 

"It’s time GM workers, and the whole working class, get their fair share," Fain said in a statement Tuesday.
 

During a call with analysts, Barra called GM's offer a record contract that would allow GM's U.S. factory workers to earn up to $84,000 a year, and also compel the company to look for further cost savings.
 

"We will not agree to a contract that isn’t responsible to our employees and our shareholders," she said.
 

GM's third-quarter net income fell 7.3% to $3.06 billion, while revenue rose 5.4% to $44.1 billion. The adjusted earnings per share tracked by analysts were $2.28, ahead of Wall Street expectations and up from $2.25 a year ago because of the effect of share buybacks.
 

GM shares were volatile in early trading, hitting their lowest levels in three years before moving up about 1.5%.
 

The rising toll of the UAW strikes, the outlook for higher labor costs once a new contract is reached, rising warranty expenses and an uncertain macroeconomic outlook have forced GM to abandon previous targets for full-year financial performance that it had lifted in July.
 

As the pace of EV sales growth has slowed in North America and even industry leader Tesla is expressing caution over the pace of its expansion, GM is reworking its EV strategy in the region, pulling back from efforts to challenge Tesla's lead in the U.S. EV segment.
 

CUTTING COSTS
 

Barra said the automaker is also slowing the launch of several EV models to cut their costs, and pulling back on EV product spending.
 

GM will save billions thanks to a decision to redesign and relaunch the Chevrolet Bolt EV, using lower-cost lithium-iron batteries, and jettisoning an earlier plan to spend $5 billion for several new entry-level EVs, Barra said.
 

The next-generation Bolt also will use lower-cost lithium-iron batteries purchased from China, GM said.
 

GM is abandoning a goal of building 400,000 EVs from 2022 through mid-2024, Chief Financial Officer Paul Jacobson said.

"We're just not going to be talking about the interim production goals," Jacobson said.
 

Barra said GM has "work to do" to hit its low- to mid-single-digit earnings before interest and taxes (EBIT) margin target by 2025.
 

GM's decision to delay retooling of a large factory in Orion Township, Michigan, to build electric pickup trucks will save $1.5 billion in capital investments in 2024, Jacobson said.
 

The delay in electric truck expansion "will actually allow us to incorporate some of the changes and improvements that we've seen in early-stage production" and improve profit margins when the electric Silverados and GMC Sierras start production, he said.
 

The company has joined other automakers in urging the Biden administration to back away from ambitious emissions and fuel economy rules aimed at pushing EVs to two-thirds of the US vehicle market by 2032.

So far, GM's sales and pricing in North America have remained stable. Average selling prices for GM vehicles were $50,750 in the latest quarter, slightly down from the previous quarter.
 

However, the automaker said its cost-cutting efforts only "partially offset" higher costs for EV launches, increased warranty expenses and lower pension income in the quarter.
 

Overall, GM said profits for the quarter were pulled down by $1.5 billion because of higher costs and the impact of selling more EVs. Unlike rival Ford, GM does not break out losses from its EV operations.
 

Jacobson said GM executives are concerned about rising interest rates as well as the conflict in the Middle East and whether that could affect consumer behavior. But he did not echo Tesla CEO Elon Musk's pessimism about the impact of rising interest rates on consumer demand.
 

"What I would tell you is that so far the consumer has held up remarkably well for us as evidenced by the average transaction prices," Jacobson said.
 

GM also said losses at its Cruise robotaxi unit widened to $732 million in the quarter. GM said the losses were "in line with expectations" as operations expanded to 15 cities.