GM’s strong third-quarter results allay investor fears of slowdown

DETROIT, Oct 25 (Reuters) – Investors hailed General Motors Co.’s strong third quarter. (GM.N) as the automaker’s performance and confidence eased growing fears of a global recession.

GM shares rose nearly 2% in early trading on Tuesday as strong sales and prices of the company’s North American trucks drove higher quarterly profit that beat analysts’ estimates.

As investors feared a slowing U.S. economy would hurt demand for new vehicles, Chief Financial Officer Paul Jacobson said on Tuesday, “We haven’t seen any direct impact on our products. Prices remain high. Demand remains strong.”

“We still feel very good” about the near-term environment, Jacobson added, saying GM expects U.S. industry sales of 15 million next year, versus expectations of around 13.7 million this year.

Wedbush analyst Dan Ives in a research note called the results a “significant step in the right direction for the Detroit stalwart.”

Chief Executive Mary Barra was more measured on a call with analysts on Tuesday, describing the current operating environment as “challenging” while noting a “gradual improvement” in supply chains, including including semiconductor chips.

Barra said the company “completed and shipped nearly 75% of the unfinished vehicles we had in the company’s inventory in June.”

GM’s upbeat comments contrasted sharply with Ford Motor Co. warning in mid-September that inflation-linked supplier costs were about $1 billion higher than forecast and that it had between 40,000 and 45,000 vehicles in stock missing parts.

Ford releases its third-quarter results on Wednesday.

GM reaffirmed its guidance for full-year net income of $9.6 billion to $11.2 billion and diluted earnings per share of $5.76 to $6.76.

Diluted earnings per share in the third quarter of $2.25 beat estimates of $1.88.

The automaker reported net income of $3.3 billion, up from $2.4 billion a year earlier. Revenue jumped to $41.9 billion from $26.8 billion a year ago.

The company said 90% of its operating profit came from North America, where it earned $3.9 billion mostly from trucks and SUVs. GM raised prices for vehicles sold in North America by an average of $2,678 per vehicle.

EBIT-adjusted net margin in North America increased nearly one point to 11.2%.

GM has received 170,000 reservations for the new Chevrolet Silverado EV pickup, which will arrive in U.S. dealerships next spring.

Barra said the business will accelerate EV production slower than expected, due to a “slightly slower launch” of battery and cell production. It now plans to build a total of 400,000 electric vehicles in North America through early 2024, about six months later than planned.

GM said it continues to negotiate supply deals and direct investments in raw materials to help drive growth in electric vehicles beyond 2025.

Its majority stake Cruise The automated driving unit now expects revenue of $1 billion in 2025, said GM, which plans to start operating a robotaxi service in three cities by the end of this year.

The automaker recorded a $497 million loss on Cruise in the quarter, with a year-to-date loss of $1.4 billion.

Reporting by Ben Klayman, Paul Lienert and Joseph White, Editing by Kirsten Donovan, Bernadette Baum and Nick Zieminski

Our standards: The Thomson Reuters Trust Principles.

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