GM’s profits fell 18.5% in the first quarter

General Motors reported an 18.5% drop in first-quarter profits, mainly due to the cost of job cuts and slowing new-vehicle sales in China.

The decline comes as higher interest rates increase the cost of new vehicles for consumers and concerns persist over a possible recession in the United States.

GM said its net profit in the first three months of the year fell to $2.4 billion from $2.9 billion in the same period in 2022. First-quarter revenue rose by 11%, to $40 billion, thanks to higher prices and effective discounts.

“The first quarter exceeded our own expectations, primarily based on pricing and a consistent incentive plan, as well as continued strong demand for our vehicles,” GM chief financial officer Paul Jacobson said during an interview. a conference call.

Globally, GM sold 1.4 million vehicles in the first quarter, down 3% from the same period a year ago. Its sales in the United States increased by 18%, but its sales in China fell by 25%.

The automaker’s first-quarter profits were slashed by $900 million that GM had set aside to cover the cost of severance and other measures stemming from the cut of 5,000 salaried jobs. In total, GM is trying to cut costs by about $2 billion a year.

The effect of these cost-cutting efforts, Mr. Jacobson said, “ripples through to results faster than expected.”

GM lowered its 2023 outlook slightly. The company said it now expects 2023 net income to be between $8.4 billion and $9.9 billion. In January, he gave a range of $8.7 billion to $10.1 billion.

The trajectory of the automotive industry remains uncertain. In the United States, new vehicle sales increased by around 7% in the first quarter, to 3.6 million vehicles. But the pace of sales slowed noticeably in March. Much of the increase was due to purchases by rental car companies and other commercial fleets, rather than individual customers.

Rising interest rates and near-record prices have made it difficult for many US consumers to afford new cars and trucks. In March, car buyers paid an average of $48,008 for new vehicles, up nearly $1,800 from March 2022, according to market researcher Kelley Blue Book. The average monthly payment on new cars last month was $784, compared to $683 a year ago.

As GM’s sales in the United States increased in the first quarter, signs of slowing consumer demand across the market began to appear. Last week, AutoNation, the largest auto retailer in the United States, said its new vehicle sales fell 2% in the first quarter.

“There are a lot of mixed economic signals in the market and within auto retail, which I think warrant a more cautious approach than in recent years,” said AutoNation chief executive Mike Manley, during a conference call.

GM is hoping for an increase in electric vehicle sales later this year. In the first quarter, the company sold more than 20,000 electric vehicles in the United States. Jacobson said GM expected electric vehicle sales to hit 50,000 in the first half of the year, and about double in the second half.

“We are pleased with the robustness of demand for the electric vehicles we produce,” he said.