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Key Takeaways
- General Motors on Tuesday disclosed a surprising loss in China when reporting its second-quarter earnings.
- GM also took a more than $600 million charge for its struggling Cruise autonomous vehicle unit.
- The China and Cruise charge news were in opposition to higher GM revenue and profit for the period that beat analysts’ estimates.
- Although the automaker adjusted its full-year outlook higher, GM CEO Mary Barra predicted the rest of this year will be “challenging.”
- GM stock was down sharply after the earnings report.
General Motors (GM) shares tumbled Tuesday after the biggest U.S. automaker announced a surprising loss in China and took a $600 million charge for its struggling Cruise autonomous vehicle unit.
GM Chief Executive Officer (CEO) Mary Barra told analysts following the release of second-quarter earnings Tuesday that the company had anticipated a return to profitability in the period, but now it believes the rest of the year will remain “challenging” because of continuing headwinds.
Along with the $600 million charge, Barra explained in a letter to shareholders that the Cruise unit was pausing production of the specialty-made Origin autonomous vehicle and shifting autonomous vehicle efforts to the next-generation Chevrolet Bolt. She noted that the move “addresses the regulatory uncertainty we faced with the Origin because of its unique design.” Barra added that the per-unit costs would be much lower, “which will help Cruise optimize its resources.”
GM’s Revenue, Profit Beat Analyst Estimates
The news offset GM’s strong results. The company posted a second-quarter adjusted earnings per share (EPS) of $3.06, a 60% jump from the year-ago quarter, with revenue rising 7.2% to $47.97 billion. Both were well ahead of the average analyst estimates compiled by Visible Alpha.
The company now expects full-year adjusted EPS of $9.50 to $10.50, higher than its earlier forecast of $9 to $10. It sees adjusted earnings before interest and taxes (EBIT) in the range of $13 billion to $15 billion, up from the previous outlook of $12.5 billion to $14.5 billion.
Vehicle deliveries rose 3% in North America, and the 696,000 sales in the U.S. was the best quarter for the region since the fourth quarter of 2020. Wedbush Securities analysts pointed to that, in addition to the company’s profit expansion, in saying they believe “the long-awaited turnaround for the GM story is now underway.”
However, deliveries slumped 26.3% in the Asia-Pacific, Middle East, and Africa region, with a 29.1% plunge in China. Income in that country for GM swung to a loss of $104 million from a profit of $78 million in the second quarter of last year.
Despite Tuesday’s loss of 6.5% to $46.32 as of 2:15 p.m. ET, shares of General Motors have added nearly 30% of their value this year.