Financial Performance

GM Profit Takes Big Hit From Factory Downtime

The automaker has been retooling factories to prepare for the launch of new full-size pickups.
Matthew HellerApril 27, 2018

General Motors’ quarterly profits tumbled as production fell at factories that the automaker is retooling ahead of the launch of new full-size pickup trucks.

The hit from factory downtime was significant, with pretax profits in North America for the first quarter declining to $2.2 billion from $3.5 billion a year ago.

GM’s overall net income fell 59.8% to $1.05 billion, while operating profit came in at $2.6 billion, down 26.6% from the same quarter in 2017. But the company on Thursday also reported adjusted earnings of $1.43 per share on revenue of $36.1 billion, beating analysts’ estimates of $1.24 per share on revenue of $34.66 billion.

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“Results this quarter were in line with our expectations with planned, lower production in North America related to the transition to our all-new Chevrolet Silverado and GMC Sierra,” CEO Mary Barra said in a news release. “We are on plan to deliver another strong year in 2018.”

As CNBC reports, “Like its rival Ford, GM has been shifting its portfolio away from passenger cars and toward trucks, SUVs and crossovers, which combine elements of cars and SUVs.”

SUVs and trucks accounted for 65% of the U.S. market at the end of 2017, up from less than 50% in 2008.

Ford announced Wednesday it will cut its car lineup to just the Mustang and all-new Focus Active crossover in a bid to boost production of trucks and SUVs, which also tend to be more profitable than passenger cars. But Barra said the sedan segment is still “significant” for GM.

“We think there’s an opportunity, because we’ve made the investments, we need to deploy little-to-no capital as we move forward,” she said on an earnings call.

In the U.S., according to the Detroit News, GM is doubling-down on high-margin products in 2018, preparing for the launch of the 2019 Chevrolet Silverado and the 2019 GMC Sierra-Denali pickup trucks.

CFO Chuck Stevens said he expects strong performance in the second quarter, but the continued switch to trucks will likely hurt second half results.