General Motors profits rise despite the strike

General Motors profits rise despite the strike

New York

GM’s profits rose last quarter, even as the company lost $200 million in the first two weeks of the United Auto Workers strike.

Earnings per share rose to $2.28, compared to $2.25 in the previous quarter. Analysts surveyed by Refinitiv expected earnings to fall sharply to $1.88 per share. Investors look closely at this measure when judging financial performance.

GM’s adjusted net income fell to $3.1 billion from $3.3 billion a year earlier. But the company boosted its earnings per share throughout the year by buying back its own stock, a controversial tactic that critics say artificially inflates companies’ stock prices without improving the company’s financial condition.

Revenue rose 5% to $44.1 billion, which also beat expectations of $43.7 billion.

The company said that The strike cost her $200 million In the first two weeks of this quarter. But those costs have since risen, with costs reaching $600 million during the first three weeks of this month, or about $200 million per week. This is because the UAW increased the extent of work stoppages.

The UAW He was on strike Against General Motors as well as rivals Ford and Stellantis since September 15. The targeted strike began with a work stoppage at one assembly plant for each of the automakers and a strike of 12,700 people but has since grown.

GM offered the UAW a standard contract with a 23% pay scale increase over the life of the contract that runs through 2028, along with cost-of-living adjustments to protect workers from rising prices and larger contributions to their retirement accounts.

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but UAW President Sean Fein He told members Friday that GM and other automakers are able to pay more and that the union needs to win a better contract to make up for concessions the union has offered in the past when companies were struggling financially.

The company withdrew its full-year earnings guidance to investors.

“We made the decision to withdraw guidance primarily due to the uncertainty surrounding the strike,” CFO Paul Jacobson said in an interview on CNBC. “We don’t want to speculate on where the next plant might be exposed or how long it might last.”

He said before the strike that the company’s performance was at the high end of its previous earnings guidance. He said he believes investors understand the situation with the strike impacting results.

“There’s obviously uncertainty there. I think the solution is to try to get everyone back to work as quickly as possible, and that’s what we’re committed to doing.” “The negotiations have become too complicated at the table. I would rather leave those.” [details] in the room. We do our best to meet the UAW where they ask, and where we are able to do so.

In a letter to shareholders, GM CEO Mary Barra addressed the strike and the cost of any new contract reached.

“It was clear after the onset of Covid that wages and benefits across the U.S. economy would need to increase due to inflation and other factors,” Barra wrote. She said the company’s current offer to the union “rewards our team members but does not put our company and their jobs at risk.”

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“It is clear that in light of changing industry prices, demand expectations and rising labor costs, we have to do something” to meet the company’s stated earnings goals in the coming years, she said. “The work has already begun and I am confident that we will achieve our goals and grow from there.”

The strike isn’t the only headwind the company faces. Although profitability in the United States was strong, international operations were slightly better than break-even, even though US sales amounted to only 42% of its global sales. The strike only affects the company’s operations in the United States.

While sales in the United States rose 21% from the previous year, supply chain issues, especially a shortage of computer chips, limited sales. Inventory of its vehicles for sale. But sales in China, GM’s largest market, fell 14%, which the company attributed to increased competition in the market there. Its Chinese sales are now about 20% less than its US sales.

The company also reported that its costs rose by about $1 billion compared to the previous year, which it said was primarily driven by electric vehicle-related costs, lower pension income, and higher warranty costs. It said the mix of vehicles sold also reduced about $600 million from its operating income in the quarter compared to last year, which it said was due to a more normalized mix of vehicles with an increased supply of products on sale. GM Financial’s operating income also fell by about $200 million from a year ago in the face of higher interest rates.

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But it offset much of those costs through strong sales and pricing, which together raised operating income by about $1.2 billion.

There are now more than 40,000 auto workers on strike, including 9,200 striking members at General Motors alone. The union has struck two GM assembly plants in Wentzville, Missouri, and Lansing, Michigan, as well as a network of 18 parts and distribution centers across the country.

The UAW has threatened to do so The strike expands to include GM’s most profitable plant in Arlington, Texas, where it manufactures the company’s full-size SUVs: the Chevrolet Tahoe and Suburban, the GMC Yukon, and the Cadillac Escalade. It has already expanded the strike to include the largest and most profitable factories stronghold And Stellantis But it has so far halted the strike at the Arlington plant. If this plant were to close due to a strike, the financial cost to GM would rise.

shares GM It rose more than 1% in pre-market trading on better-than-expected results.

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