General Motors reported a much better-than-expected first quarter, and said it will do even better than it expected for full-year earnings. But it also said it believes car prices could soon start to retreat from near-record highs.
America’s largest automaker reported adjusted earnings of $3.1 billion, or $2.21 a share. While that’s up only slightly from what it earned a year earlier, it’s much better than the forecast of $1.73 a share that had been forecast by analysts surveyed by Refinitiv.
Revenue rose 11% compared to a year earlier to nearly $40 billion.
It also said it now expects to earnings between interest and taxes to be between $11 billion and $13 billion for the year. That’s up $500 million from the range it gave three months ago.
GM CEO Mary Barra said the improved guidance was because of “performance of the business and the opportunities ahead of us.”
GM is benefiting from consumers willing to pay top dollar to get the cars they want with new, often expensive options. New car prices have started to decline slightly, but remain near-record levels.
GM reported a 4% increase in the number of cars sold globally to 864,000, but a 7% increase in the revenue to per vehicle sold. The average North American price GM received from dealers for each car reached $45,500 in the quarter.
But the company warned it expects those prices to start to fall.
“We are planning and assuming we give some of that [price increase] back and are net flat for the year,” CFO Paul Jacobson told analysts during a call Tuesday.
Despite the improved profitability and outlook, the company is looking to cut $2 billion a year from its costs. About half of those costs come from voluntary job cuts announced earlier this year. GM disclosed earlier this month that 5,000 salaried staff had accepted buyout offers. The company took a $875 million charge in the quarter related to the cost of those buyouts.
GM also faces a contract expiration this fall with the United Auto Workers union, which reached the current deal in 2019 after a nearly six-week long strike. The union recently elected a new president who has vowed to take a hard line in negotiations. Barra wouldn’t comment on the upcoming talks when asked about it during the call, but said she’s hopeful of reaching a mutually-beneficial deal with the union in upcoming talks.
“We’re not going to negotiate in the media here,” she said. “We’re working to make sure we’re building a strong relationship with the new leadership, getting to know them and making sure we identify what are the challenges of the business and then it becomes working together to solve the issues to get to a good place.”
Shares of GM (GM) slipped about 3% in morning trading, despite the strong results and guidance.
