General Motors posted a surprise earnings gain for the third quarter Tuesday, but pulled full-year guidance and said it would slow production of electric vehicles. GM stock fell to a new multiyear low intraday.
Hours after the GM earnings report, the United Auto Workers union said it is expanding strikes to GM's "largest plant and biggest moneymaker" in Texas.
General Motors Earnings
Estimates: Analysts had expected GM earnings to slide 17% to $1.87 per share, according to FactSet. Revenue was seen growing 1%, year over year, to $42.482 billion.
Results: GM earnings grew 1%, year over year, to $2.28 a share. Revenue rose 5% to $44.13 billion. Both are the smallest gains in five quarters, amid the United Auto Workers strike and tougher year-over-year comparisons.
Outlook: General Motors withdrew 2023 guidance, citing the ongoing UAW strike. Wall Street had expected full-year adjusted EBIT of $13 billion. That was right at the midpoint of General Motors' prior guidance of $12 billion-$14 billion. GM had also said in July that it expects adjusted automotive free cash flow of $7 billion-$9 billion.
On a per-share basis, Wall Street saw full-year EPS of $7.36, a 3% decrease vs. 2022, FactSet shows.
GM Stock Pegs A Low
Shares of General Motors lost 2.3% to 28.56 in Tuesday's stock market action. GM stock hit 28.01 before paring losses, the lowest intraday mark since September 2020. It lost 1.5% on Monday, ahead of earnings.
Following the GM earnings report, the United Auto Workers union said its newly expanded strike has shut down production at the Arlington assembly plant, which makes some of GM's most profitable sport utility vehicles, including the GMC Yukon and Cadillac Escalade. "GM's latest offer fails to reward UAW members for the profits they've generated," the union said in a news release, which cited a "record" Q3.
In a letter to shareholders Tuesday, before the UAW strike expansion, GM CEO Mary Barra addressed the issue. She said the company has offered autoworkers "a historic contract" with record wage increases and job security, but accepting "unsustainably high costs" would put the future of the company and its workers at risk.
On Monday, the United Auto Workers union had expanded its strike to a Stellantis plant in suburban Detroit that produces the bestselling Ram 1500 full-size pickup trucks. The union had similarly described that plant as Stellantis' "largest plant and biggest moneymaker."
Stellantis stock fell nearly 1% Tuesday after closing up 0.3% Monday. STLA stock, which is on the IBD 50 list of top growth stocks, undercut the 50-day moving average.
Ford, which is due to report earnings Thursday, shed 0.8%.
UAW Strike Costs Mounting
On Oct. 4, General Motors set up a new $6 billion line of credit to bolster its balance sheet, while girding for further strikes by the United Auto Workers union.
The UAW strikes, which started Sept. 15, cost GM $200 million in September, the company said. Loss estimates are still climbing, now above $500 million for GM and Ford, as walkouts at car plants and car parts factories stretch deep into October.
On Oct. 20, the UAW leaders reported progress in contract talks with the Detroit 3 automakers, but said that "these extremely profitable companies have more to give."
The UAW strike could hardly have come at a worse time for GM, Ford and Chrysler parent Stellantis.
Rising bond yields and the new Middle East war are chilling investor sentiment. Even before that, analysts feared high inflation and interest rates are starting to weigh on car buyers, though Q3 U.S. sales stayed strong due to pent-up demand, especially for GM.
Auto loan delinquencies increased in September, although defaults declined.
GM Going Slower On EV Shift
On Tuesday, GM CEO Mary Barra told shareholders that "we are also moderating the acceleration of EV production in North America to protect our pricing and adjust to slower near-term growth in demand."
Globally, traditional automakers are making a bold and risky transition out of fossil-fuel cars and into electric vehicles.
But both GM and Ford have scaled back investments this year on developing electric vehicles and building out EV battery factories.
On Oct. 18, even the Tesla growth story showed signs of wilting. The EV leader tapped the brakes on new construction, with deliveries lagging existing capacity.
"We want to get a sense for what the global economy is like before we go full tilt on the Mexico factory," Tesla CEO Elon Musk said.
Musk added that he was worried about the impact of high interest rates on car buyers.
