DETROIT – Although General Motors managed to reopen its plants in the US in the last half of the second quarter, the company still lost $ 806 million between April and June.
The Detroit automaker closed its factories on March 18 and they remained inactive for two months due to the coronavirus. Production was not resumed quickly enough to contain losses.
Like other automakers, GM accounts for revenue when vehicles are shipped from factories, so there was little money coming in for about seven weeks in April and May.
The company reported a loss of 50 cents per share, excluding single items. This was better than Wall Street expected, with analysts polled by FactSet predicting a loss of $ 1.77 per share.
Revenue was cut in half to $ 16.78 billion, but this also exceeded expectations.
GM spent more than $ 9 billion in the quarter, including nearly $ 8 billion in operations and $ 1.1 billion in investments. He lost pre-tax money in all of his business units, except for his financial arm. In its traditionally profitable North American wing, GM lost $ 100 million.
The company increased loans on its revolving credit line to $ 16 billion to overcome the crisis, raising automotive debt to more than $ 32 billion. It was 13 billion dollars a year ago.
But CFO Dhivya Suryadevara said there was hope in the second half of the year. If US sales continue at an annual rate of 14 million and production is not interrupted, GM is expected to generate $ 7 billion to $ 9 billion in cash from July to December, offsetting much of the cash burn in the first half. The company should be able to pay its revolving credit line by the end of the year, she said.
She also said that if the recovery continues with the pandemic, GM expects pre-tax earnings of $ 4 billion to $ 5 billion in the second half of the year.
“There is a lot of uncertainty out there,” she said.
Sales in the US, GM’s most profitable market, fell 34% in the quarter, although executives said there was pent-up demand for vehicles, especially pickup trucks. GM put many of its truck plants into three shifts, trying to make up for lost production.
Suryadevara said the company almost achieved earnings before income tax in North America in a challenging quarter.
“These results illustrate the resilience and earnings capacity of the business as we make the critical investments necessary for our future,” said Suryadevara in a prepared statement.
GM is seeing signs of improvement, and some areas, such as pickup trucks, were constrained by low inventory levels when factories were back up and running. “The company is working all the way to increase resellers’ inventory in the U.S. and has restarted all U.S. truck and SUV plants in three shifts, and almost all other factories to pre-pandemic levels,” said GM.
US sales fell 35% in April, but increased to a decline of about 20% year-on-year in May and June, the company said.
The company recorded strong sales of pickup trucks and new full-size SUVs, such as the Chevrolet Tahoe and GMC Yukon. “They are running away from dealer lots,” said Suryadevara.
CEO Mary Barra said the company will add 200 workers to its pickup plant in Fort Wayne, Indiana, to meet demand. The workers are likely to be transferred from other GM factories.
With China recovering from the coronavirus outbreak, GM posted revenue of $ 200 million there. But its international operations, including China, lost a total of $ 300 million.
In a conference call with analysts, Barra did not rule out the change in GM’s name, better reflecting the company’s commitment to electric vehicles.
“It is something that we evaluate and analyze when the time is right and what are the proof points that everyone looks at it and makes it real,” she said. “We will make the necessary changes to increase shareholder value”.
Barra was responding to a question from Morgan Stanley analyst Adam Jonas about changing the name from 111 years to Ultium, which GM chose for its new electric vehicle battery system. Jonas said investors value electric vehicles more than internal combustion engines, which they see as part of the “melted ice cube” business.
She also said the company is open to evaluating a split in GM’s electric vehicle business into a separate company.
The entire auto industry was expected to struggle this quarter, with the pandemic cutting sales. Electric vehicle company Tesla may end the only exception because it managed to make a profit of $ 104 million. But Nissan, which is struggling in Japan, reported a loss of $ 2.7 billion (285.6 billion yen) in the period.
GM shares fell 2% to $ 25.79.