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Tag: Paul Jacobson

  • GM secures new $6 billion credit line as UAW strike costs reach $200 million

    GM secures new $6 billion credit line as UAW strike costs reach $200 million

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    DETROIT – General Motors secured a new $6 billion line of credit as the automaker braces for additional strikes by the United Auto Workers union.

    “The facility that we announced today is a $6 billion line of credit that I think is prudent in light of some of the messages that we’ve seen from some of the UAW leadership that they intend to drag this on for months,” CFO Paul Jacobson told CNBC’s Phil LeBeau in an interview on “Halftime Report.”

    The targeted strikes already cost the automaker $200 million during the third quarter, GM said Wednesday.

    A GM spokesman said the $200 million strike cost is due to lost production on wholesale volume, largely due to the UAW’s initial Sept. 15 strike at GM’s midsize truck and full-size van plant in Wentzville, Missouri. The strike has since expanded to GM’s parts and distribution facilities nationwide and, as of last Friday, a crossover plant in mid-Michigan.

    As a result of the strike in Missouri, GM also idled its Fairfax Assembly Plant in Kansas, where it builds the Cadillac XT4 SUV and the Chevrolet Malibu sedan, and laid off nearly 2,000 workers.

    Both GM CEO Mary Barra as well as Ford Motor CEO Jim Farley have publicly criticized UAW President Shawn Fain and the union’s strike strategy, claiming Fain is not actually interested in reaching deals for 146,000 workers with GM, Ford and Chrysler parent Stellantis.

    Members of the United Auto Workers (UAW) Local 230 and their supporters walk the picket line in front of the Chrysler Corporate Parts Division in Ontario, California, on September 26, 2023, to show solidarity for the “Big Three” autoworkers currently on strike. 

    Patrick T. Fallon | AFP | Getty Images

    “It’s clear that there is no real intent to get to an agreement,” Barra said in an emailed statement Friday night. “It is clear Shawn Fain wants to make history for himself, but it can’t be to the detriment of our represented team members and the industry.”

    Fain has consistently said the union is available to negotiate 24/7 and has in turn accused the automakers of slow-walking negotiations.

    GM’s newly announced line of credit will require the automaker to maintain at least $4 billion in global liquidity and $2 billion in U.S. liquidity. The terms of the credit agreement also restrict GM from mergers or sales of assets and limits on other, new debt. As of June 30, GM’s total automotive liquidity was $38.9 billion.

    The credit line comes more than a month after Ford obtained a $4 billion line of credit to help it manage through “uncertainties” in the market.

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  • General Motors raises full-year guidance, announces deeper cost-cutting

    General Motors raises full-year guidance, announces deeper cost-cutting

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    Mary Barra, CEO, GM at the NYSE, November 17, 2022.

    Source: NYSE

    DETROIT — General Motors is raising its 2023 guidance for a second time this year after the automaker reported second-quarter results Tuesday that were up sharply year over year.

    The Detroit automaker also said it is increasing cost-cutting measures through next year and now plans to reduce $3 billion in expenditures compared with previous guidance of $2 billion.

    GM CFO Paul Jacobson said the reductions will include sales and marketing spending, salary employment, and other costs.

    GM shares were initially up in premarket trading following the results but were down nearly 3% just after the market opening.

    Here’s what GM reported for its second quarter:

    • Adjusted earnings per share: $1.91. (This is not comparable to $1.85 analysts expected due to one-time items.)
    • Revenue: $44.75 billion vs. $42.64 billion expected, according to Refinitiv consensus estimates

    GM’s earnings included an unexpected $792 million charge for new commercial agreements between GM and LG Electronics and LG Energy Solution. The cost is a result of the automaker sharing expenses with the companies for a recall of its Chevrolet Bolt EV models in recent years, which were previously expected to be paid by the LG companies.

    Taking that charge into account, the company reported adjusted earnings before interest and taxes of $3.23 billion.

    On an unadjusted basis, the company reported net income attributable to stockholders of $2.57 billion, or $1.83 per share, up nearly 52% from a year earlier when it earned $1.69 billion, or $1.14 per share.

    Revenue during the quarter jumped 25% compared with $35.76 billion a year earlier.

    For the full year, GM is raising its adjusted earnings expectations to a range of $12 billion to $14 billion, up from a previous range of $11 billion to $13 billion. GM also increased expectations for adjusted automotive free cash flow to a range of $7 billion to $9 billion, up from $5.5 billion to $7.5 billion, and for net income attributable to stockholders of $9.3 billion to $10.7 billion, compared with the previous outlook of $8.4 billion to $9.9 billion.

    Jacobson said the raise is a result of stronger-than-expected pricing, demand and capital discipline.

    However, the guidance increase is contingent on GM successfully negotiating new labor agreements with the United Auto Workers and the Canadian Unifor unions this year without a work stoppage or strike. The UAW has new leadership that has publicly been far more confrontational than prior union officers. The current contracts covering roughly 150,000 union workers for the Detroit automakers are set to expire Sept. 14.

    “We have a long history of negotiating fair contracts with both unions that reward our employees and support the long-term success of our business. Our goal this time will be no different,” GM CEO Mary Barra said Tuesday in a shareholder letter. “That’s the best possible outcome for all our key stakeholders, including our team, plant communities, dealers, suppliers and investors.”

    A work stoppage would add to the auto industry’s yearslong production problems resulting from the coronavirus pandemic and significant supply chain constraints such as semiconductor chips.

    During the last round of bargaining in 2019, a breakdown in negotiations between the Detroit automakers and the UAW led to a national 40-day strike against GM. The automaker has said the strike cost it about $3.6 billion that year.

    For GM specifically, a work stoppage could cost it hundreds of millions of dollars a week and delay the production ramp-up of its new electric vehicles, which the automaker has already been slow to produce. Jacobson said GM achieved North American production of 50,000 EVs during the first half of the year, however acknowledged “it’s been a little bit challenging.”

    He said the automaker will disclose more about the slow production of its new EVs during an analyst call Tuesday.

    Before reporting results Tuesday, GM’s earnings beat expectations 86% of the time, according to Bespoke. However, the stock only averages a 0.17% gain on earnings day.

    Shares of GM are up roughly 16% this year. They closed Monday at $39.30 per share — off from a 52-week high of $43.63 per share, notched in February.

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  • GM smashes expectations and guides toward a strong 2023, despite margin squeeze

    GM smashes expectations and guides toward a strong 2023, despite margin squeeze

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    Mary Barra, CEO, GM at the NYSE, November 17, 2022.

    Source: NYSE

    DETROIT — General Motors handily beat Wall Street’s top- and bottom-line expectations for the fourth quarter, while forecasting another solid year of results in 2023.

    The strong report suggests GM is hanging onto record, or near-record, results even as the U.S. automotive industry begins to normalize after several years of record-low inventories and resilient consumer demand.

    Shares of GM were up roughly 5% in premarket trading Tuesday.

    Here’s how GM performed to close out last year, compared with analysts’ estimates as compiled by Refinitiv:

    • Adjusted earnings per share: $2.12 vs. $1.69 expected
    • Revenue: $43.11 billion vs. $40.65 billion expected

    The fourth-quarter results easily topped a year earlier, when the automaker reported an adjusted EPS of $1.35 and revenue of $33.58 billion for the final three months of 2021.

    GM’s full-year 2022 revenue came in at $156.7 billion, with net income attributable to stockholders of $9.9 billion and adjusted earnings before interest and tax at a record $14.5 billion. Those results marked the high-end of the company’s previously revised guidance.

    Still, the automaker is showing signs of a margin squeeze. GM’s net income slipped last year, down by less than 1% from full-year 2021 to $9.9 billion, with a profit margin that was off 1.6 percentage points to 6.3%. Its adjusted profit margin was 9.2%, down 2.1 percentage points compared with the previous year.

    GM said it incurred special charges in the fourth quarter of $511 million related to a buyout program for its Buick dealers and $657 million related to shuttering its limited operation in Russia.

    2023 guidance

    For 2023, GM expects net income attributable to stockholders of between $8.7 billion and $10.1 billion. It expects adjusted earnings before interest and taxes of $10.5 billion to $12.5 billion and adjusted earnings per share of between $6 and $7.

    Those results would be below 2022 earnings, but above average analyst forecasts compiled by Refinitv that called for EPS of $5.73 this year.

    A five-day performance of GM’s stock.

    GM forecast 2023 net automotive cash from operating activities to come in between $16 billion and $20 billion and sees automotive free cash flow of $5 billion to $7 billion.

    Wall Street has been bracing for a “demand destruction” scenario for the last several quarters, with some analysts suggesting automakers may need to execute cost-cutting measures to offset recessionary spending shifts.

    Demand and pricing for GM’s vehicles “remain strong,” CFO Paul Jacobson told reporters Tuesday morning. He said GM is being “appropriately cautious” but vehicle inventories remain constrained amid strong demand.

    “We think the underlying business is going to be pretty consistent with what we saw last year, and I think that’s a slightly more bullish statement than where most of the market is,” he said.

    GM will execute a $2 billion cost-cutting plan through the next two years, according to Jacobson. Up to half of those savings are expected this year, he said. GM expects some head count reduction due to attrition but the company is “not planning layoffs,” Jacobson said.

    EVs

    GM CEO Mary Barra, in a letter to shareholders, described 2023 as a “breakout year” for the company’s electric vehicle business, highlighting the introduction of more mainstream products like the Chevrolet Equinox EV as well as increases in production of its current models.

    Barra confirmed GM’s revised plans to produce 400,000 EVs in North America between 2022 and the first half of next year.

    GM also announced Tuesday an equity investment of $650 million in Lithium Americas Corp. to develop a lithium mine in Nevada known as Thacker Pass. GM is to receive exclusive access to phase one of production, the automaker announced.

    Shares of Lithium Americas were up roughly 8% in premarket trading Tuesday.

    GM said Monday it launched production of the GMC Hummer SUV EV at a plant in Detroit. That vehicle is expected to be followed by an electric Chevrolet Silverado work truck by midyear and electric versions of the Chevrolet Blazer and Equinox during the second half of 2023.

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