GM Posts Loss but Outlook Brightens -- WSJ
30 July 2020 - 5:02PM
Dow Jones News
By Mike Colias
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 30, 2020).
General Motors Co. posted a $758 million second-quarter net loss
mostly due to factory shutdowns in its home U.S. market, although
resilient sales of pricey pickup trucks propelled results beyond
analysts' forecasts.
The company said its U.S. plants are cranking into overdrive to
replenish thinly stocked dealership lots, a sign that its bottom
line could rebound in coming quarters as the company tries to make
up for weeks of lost production this spring from the pandemic. GM
said nearly all its U.S. factories are running at prepandemic
levels.
GM on Wednesday didn't issue a formal 2020 earnings-per-share
forecast, after withdrawing earlier guidance when the pandemic hit.
But finance chief Dhivya Suryadevara said GM could rebound to post
$4 billion to $5 billion in operating profit in the second half of
the year, if U.S. car sales remain resilient and barring any more
Covid-19-related factory disruptions.
GM lost an adjusted 50 cents per share for the April-to-June
period, better than the average analyst estimate of $1.77,
according to FactSet. The pretax profit adjusted for one-time items
was $536 million, compared with a $3 billion profit in the same
period a year earlier.
GM's shares fell more than 2% in midday trading Wednesday.
"The industry has been holding up and recovering well, and
that's especially the case for our full-size truck business," Ms.
Suryadevara told reporters Wednesday.
GM's factory output in North America -- historically the source
of nearly all of its profit -- was frozen for roughly half the
quarter after the company idled plants to comply with
state-mandated quarantines this spring. Still, the company posted a
loss of $101 million in the region, while analysts had expected a
loss of about $1.7 billion, according to FactSet.
Revenue fell 53%, to $16.78 billion, a result of the factory
shutdowns.
GM said it ended the quarter with cash and liquidity of $30.6
billion. Investors remain focused on car companies' ability to
weather potential future waves of Covid-19 outbreaks, according to
a Bank of America research note last week. GM and other major auto
makers burned through billions of dollars in cash this spring after
their plants shut down.
GM and other global auto makers scrambled to hoard cash this
spring as the pandemic spread and operations were suspended for
several weeks, choking off cash flow. GM padded its cash position
by more than $20 billion by drawing down a revolving credit line,
suspending its dividend and issuing unsecured debt.
Car makers reopened most of their U.S. factories in May and in
many cases have ramped up output to near prepandemic levels. Sales
at dealerships also have snapped back more quickly than analysts
predicted when the crisis hit, sparking hope that the industry's
recovery can continue in the second half of the year.
For GM, stronger-than-expected demand for big pickup trucks have
helped avoid sharp losses.
GM executives say they have prioritized output of the company's
big pickup trucks, the Chevrolet Silverado and GMC Sierra, which
saw selling prices rise on average by about $1,500 per vehicle in
the second quarter from the first, to about $47,700, the company
said. The trucks deliver about half of GM's global profit, analysts
estimate.
Many dealers have said they are running low on pickup-truck
models following better-than-expected sales this spring, when GM
offered deep discounts and zero-interest promotions to prevent
sales from cratering during Covid-19 lockdowns.
Analysts expect GM's operating income to rebound in the second
half of the year as the company races to replenish inventory. The
average analyst estimate has GM generating $4 billion in operating
income over the last two quarters of the year, according to
FactSet.
Ms. Suryadevara said GM burned through about $9 billion in cash
during the quarter, mostly from paying suppliers for past
deliveries at a time when its fresh cash flow was frozen because of
the factory shutdowns. She expects GM to generate $7 billion to $9
billion in cash in the second half, assuming sales continue at
about their current pace and there are no further factory
disruptions from the pandemic.
Ms. Suryadevara told reporters GM hopes by year-end to repay a
$16 billion revolving credit line that it drew down this
spring.
China was a second-quarter bright spot for GM, which notched
income of about $200 million there, flat with a year earlier.
Plants gradually reopened after China's Covid-19 outbreak began to
subside in late winter, and vehicle demand has been stronger than
expected.
Write to Mike Colias at Mike.Colias@wsj.com
(END) Dow Jones Newswires
July 30, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
General Motors (NYSE:GM)
Historical Stock Chart
From Sep 2024 to Oct 2024
General Motors (NYSE:GM)
Historical Stock Chart
From Oct 2023 to Oct 2024