GM continues to make profits despite headwinds and seeks to execute on EV strategy | Business

General Motors Co. CEO Mary Barra said the company was in “execution mode” for its electric vehicles and again touted its plans while reporting a first-quarter profit on Tuesday – the same day, its Crosstown rival, Ford Motor Co., celebrated the launch of its electric F. -150.

Coincident events gave each automaker a way to try to outdo the other. Ford delivers the first full-size electric truck, beating GM to the one-year market with its F-150 Lightning. GM’s electric Silverado will be released next year, but Barra proudly told investors that pre-production of the truck would begin “in a few weeks” and reservations were reaching 140,000.

As it works to execute on its electric vehicle plans – predicting for the first time that it will generate $50 billion in revenue from these vehicles by 2025 – GM continues to sell gasoline-powered products directly from the truck. The Detroit automaker continues to maintain strong demand despite record vehicle prices driven by low inventory amid supply chain challenges.

The automaker posted a net profit of $2.9 billion in the first quarter of 2021, which was only a slight drop from last year’s first quarter profit of $3 billion. January-March revenue increased $36 billion from GM’s $32.5 billion in the first quarter of 2021.

Adjusted earnings before interest and taxes were $4 billion, compared to $4.4 billion a year ago. GM’s net profit margin for the quarter was 8.2%. GM North America’s pretax profit totaled $3.1 billion in the quarter. GM International’s pre-tax profit was $328 million for the first quarter of this year.

“The street was bracing for absolute disaster. And in the end, it was better than feared,” said Wedbush Securities analyst Dan Ives.

First-quarter numbers and the company’s reaffirmation of its adjusted earnings forecast in the $13 billion to $15 billion range this year did little to move GM’s stock, which fell more down 4% for the day to $38.04 with US markets. plunging on Tuesday on fears of an economic slowdown. Ford shares also fell to $14.71 for a 3% decline.

GM remains committed to proving itself as a leading maker of electric vehicles. The automaker aims to reach 1 million units of electric vehicle capacity in North America by the end of 2025 and aims to produce 400,000 all-electric vehicles there this year and next. next.

“We’re just going to keep executing and keep working towards our EV leadership goal,” Barra said. “We have a team that has demonstrated that we will capitalize on opportunities, we will solve challenges and work with our stakeholders across the company to achieve this.”

GM executives believe so deeply in the mission that they now tie their compensation to electric vehicle goals, Barra told investors.

“Now is a good time to directly tie a significant portion of long-term compensation for me and all other GM executives to the achievement of our EV goals,” she said. “Starting this year, we added metrics for North American EV volumes, EV launch timing, and EV launch quality to our existing EBIT margin and total shareholder return metrics. “

GM issues its proxy statement detailing executive compensation on April 29.

The Detroit automaker has already launched its GMC Hummer EV pickup and Cadillac Lyriq electric crossover. By mid-2023, the automaker will also have an SUV version of the Hummer, the Silverado EV, an electric Chevrolet Blazer SS and an Equinox EV, all based on its new Ultium electric platform. The non-Ultium-based Chevrolet Bolt EV and EUV are also back on the market after a months-long sales hiatus as the automaker issued a battery fire recall on the products.

“Right now, Mary and the team are trying to get into 2023 as quickly as possible, because that’s where the EV story starts to take hold,” Ives said.

GM’s BrightDrop business, focused on offering electric delivery options and services, will have two electric vans: the Zevo 600 and Zevo 400. The larger Zevo 600 is in production at a supplier plant, with a higher production volume expected to begin in late 2022 at the plant. CAMI factory in Ontario, with 400 productions to follow in 2023.

And on Monday, GM Chairman Mark Reuss announced that an electrified Chevrolet Corvette would be available as early as next year. An all-electric version of the Corvette will also be offered.

“Investors should be encouraged that GM is playing a long-term strategic game despite some of the short-term frustrations presented by supply chain challenges,” said Jessica Caldwell, chief information officer at Edmunds.com. Inc., a vehicle information website. “GM has a slew of exciting electrified products to bring to market in the near future with EV variants of the Chevy Blazer, Equinox and Silverado, and now an EV version of its iconic Chevy Corvette, which puts GM in an enviable position that is almost unfathomable looking back to his days of bankruptcy.”

GM’s first-quarter results come after the automaker earlier this month reported sales of 512,846 vehicles in the first three months, down 20% from a year earlier, the drop in supply continuing to limit stocks.

In 2021, automakers lost billions in potential revenue due to a shortage of semiconductors or microchips found in vehicles, from heated seats to infotainment systems. Although the semiconductor supply situation is still fluid, GM did not have to close any factories for several months until it recently had to halt production at the Fort truck plant. Wayne, Indiana.

Chief Financial Officer Paul Jacobson told investors Tuesday that GM expects “to see semiconductor availability continue to improve.”

U.S. dealer lot inventory is expected to remain tight with levels of 270,000 at the end of the quarter, with much of that inventory in transit, Jacobson said. The inventory on the ground was less than 15 days old, he added. Low supply and strong demand led to increases in the average transaction price. For example, GM saw a 10% year-over-year increase on truck ATPs and 20% on crossovers.

“We recognize that the consumer is facing inflationary pressures; however, we continue to see continued strong customer demand for our vehicles, including our refreshed full-size pickup trucks,” Jacobson said.

The first quarter “presented challenges for commodity and logistics costs,” but Jacobson said GM had “contractual protections in place for certain products to secure supply and provide some protection against cost volatility.

The company has also taken “proactive” measures to protect its supply, he added. Specifically, GM has secured the supply of palladium used in catalytic converters to meet production needs this year. Experts have warned that palladium supply could be a concern for automakers with the Russian invasion of Ukraine since Russia is a big supplier of the material.

“With these actions, our year-over-year raw materials and logistics headwinds are in line with our expectations of approximately $1 billion in the first quarter,” Jacobson said.

Meanwhile, GM continues to build the supply of materials it will need to execute its electric vehicle plans. Last week, the automaker announced that it had entered into a supply agreement with MP Materials Corp. for the alloy and magnets needed for electric vehicle programs. The automaker’s first of four battery cell manufacturing plants in the United States with its partner LG Energy Solution will open later this year in Lordstown, Ohio.

Ford Motor Co. reports its first-quarter results on Wednesday. Stellantis NV will publish its earnings and deliveries on May 5. The transatlantic automaker will release its results for the first half of the year on July 26.

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Angela C. Hale