Plant closings send GM to 2Q loss, but signs of improvement

In this April 23, 2018, file photo, the logo for General Motors appears above a trading post on the floor of the New York Stock Exchange. Photo: Richard Drew/AP file photo. In this April 23, 2018, file photo, the logo for General Motors appears above a trading post on the floor of the New York Stock Exchange.

The Associated Press
Created: July 29, 2020 07:08 AM

Even though General Motors was able to reopen its U.S. factories for the last half of the second quarter, the company still lost $806 million in the three months betweeen April and June.

The Detroit automaker had to close its plants from March 18 to May 18 due to the coronavirus, but production didn’t resume fast enough to stem the losses.

GM counts revenue when vehicles are shipped from its factories, so it had little money coming in for seven weeks in April and May.

The company reported a loss of 50 cents per share excluding one-time items. That was better than Wall Street expected, with analysts polled by FactSet predicting a $1.77 per-share loss.

Revenue was cut in half to $16.78 billion, and that also beat estimates.

The company burned through more than $9 billion during the quarter including spending on operations and capital.

Sales in the U.S., GM’s most lucrative market, fell 34% for the quarter, even though executives said there is pent-up demand for vehicles, especially pickup trucks. GM has put many of its truck plants on three shifts as it tries to make up for lost production.

Still, Chief Financial Officer Dhivya Suryadevara said the company nearly reached break-even earnings before taxes even in a challenging quarter.

“These results illustrate the resiliency and earnings power of the business as we make the critical investments necessary for our future,” Suryadevara said in a prepared statement.

Even though General Motors was able to reopen its U.S. factories for the last half of the second quarter, the company still lost $x billion from April through June.

The Detroit automaker had to close its plants from March 18 to May 18 due to the coronavirus, but production didn’t resume fast enough to hold off a net loss.

Like other automakers, GM counts revenue when vehicles are shipped from its factories, so it had little money coming in for seven weeks in April and May. The company reported a loss of xx cents per share excluding one-time items. That was better than Wall Street expected, with analysts polled by FactSet predicting a $1.77 per-share loss. Revenue was cut in half to $xx billion, but that also beat estimates.

The company burned through more than $9 billion during the quarter including spending on operations and capital.

Sales in the U.S., GM’s most lucrative market, fell 34% for the quarter, even though executives said there is pent-up demand for vehicles, especially pickup trucks. GM has put many of its truck plants on three shifts as it tries to make up for lost production.

The whole auto industry was expected to struggle this quarter as the pandemic cut into sales. Electric vehicle company Tesla may wind up the lone exception because it managed to post a $104 million profit. But Japan’s struggling Nissan reported a $2.7 billion loss (285.6 billion yen) for the period.

GM said sales are showing signs of improvement and in some areas, such as pickup trucks, sales have been constrained by low inventory levels as plants came back on line. “The company is working all avenues to increase U.S. dealer stocks and has restarted all U.S. truck and full-size SUV plants to three shifts, and nearly all other plants to pre-pandemic shift levels,” GM said.

U.S. sales were down 35% in April, but that improved to around 20% year over year in May and June, the company said.

The whole auto industry was expected to struggle this quarter as the pandemic cut into sales. Electric vehicle company Tesla may wind up the lone exception because it managed to post a $104 million profit. But Japan’s struggling Nissan reported a $2.7 billion loss (285.6 billion yen) for the period.

GM’s shares rose more than 3% in trading before Wednesday’s opening bell.


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