Auto giant General Motors surpasses market predictions, momentarily halts outlook adjustments due to tariff concerns
In a surprising turn of events, General Motors (GM) has postponed its guidance call with Wall Street until Thursday, aiming for a clearer picture around tariffs on the auto sector. The move comes as news reports circulated on Monday suggesting that US President Donald Trump may substantially reduce tariffs on the auto sector.
The administration is reportedly considering allowing some reimbursements on foreign auto parts, levies that were set to take effect on May 3. However, the details of this potential policy change remain unclear.
Trump's tariffs on imports of cars and auto parts have had a significant impact on GM's operations. On average, these tariffs could add about $4,911 per vehicle in parts costs and $8,641 for fully imported vehicles. For the Detroit Three - GM, Ford, and Stellantis - this translates to an estimated $42 billion in additional costs.
GM's Q1 revenue of $44.02 billion surpassed Wall Street analysts' expectations of $43.26 billion. However, the company's profits for the quarter were $2.8 billion, down 6.6% from the year-ago level. One of the factors affecting GM's profits was a fire at a key supplier that limited production of more profitable SUVs in Q1.
The tariffs, paid by automakers and not foreign governments, are particularly affecting GM's operations. The administration's 25% tariffs on car imports will result in higher costs for GM vehicles assembled in Mexico, South Korea, and other countries. Notable models produced in these countries include the Chevrolet Equinox, Chevrolet Blazer, Chevrolet Silverado 1500, and GMC Sierra 1500.
The Center for Auto Research (CAR) projects that the 25% tariffs on imported vehicles and auto parts will cost U.S. automakers approximately $108 billion this year. The tariffs are particularly vulnerable for GM's entire Buick brand, which has only one vehicle assembled in the U.S. Analysts suggest that Buick may not be sustainable in the U.S. if the tariffs remain in place.
In response to the uncertainty surrounding Trump's trade measures, GM is suspending its guidance for investors as well as its planned $4 billion in share buybacks for the remainder of the year. The Wall Street Journal reported that the White House is considering a change in its policy that would have automakers paying the 25% tariff, but not also paying tariffs on other parts and materials like those on steel and aluminum.
GM's Q1 earnings per share (EPS) were $2.78, higher than the expected $2.61. However, the company's adjusted automotive free cash flow for Q1 was $811 million, a 26% decline from a year ago and below the forecast of $833.9 million. The adjusted EBIT for Q1 was $3.49 billion, down 9.8% year-over-year but slightly above the expected $3.45 billion.
In 2024, GM assembled over 889,000 vehicles in Mexico, exporting approximately 653,200 units to the U.S. Trump is expected to clarify tariffs on the auto sector during a rally appearance in Michigan today, which may provide some clarity on GM's future plans.
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