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Thursday, 30 July 2020 22:33

GM Posts $800M Loss in 2Q, to End Salary Cuts

Written by Kalea Hall, The Detroit News

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General Motors Co. burned $7.8 billion in the second quarter navigating the coronavirus pandemic, but the Detroit automaker still beat Wall Street expectations and is hopeful it can pay down debt and generate cash going forward.

GM reported a second-quarter net income loss of $758 million on revenue of $16.8 billion in the second quarter, even as it declined to provide guidance for the rest of the year. 

 

CFO Dhivya Suryadevara said the automaker expects its operating profit to be in the range of $4 billion to $5 billion---provided U.S. vehicle sales run at a 14-million-unit rate in the second half of the year, production is not interrupted, there are no significant supplier disruptions and GM is able to rebuild inventory to 600,000 units by year end.

 

"Keep in mind this is a scenario, not a guidance, and these factors are inherently difficult to predict given the volatility in demand and production timing, as well as levels," she said. "We're confident in the fundamentals of the business and in the normal environment we would expect the cash flow generation potential of the company to be strong."

 

The Detroit automaker, despite a fluid economy, has aggressive plans to get back on track starting in August by halting salary cuts it made at the start of the virus' U.S. surge, paying back by year's end a $16 billion revolving line of credit and generating $7 billion to $9 billion in cash. But the volatile U.S. economy could affect GM's goals as some states battle surges in coronavirus cases.

 

"While we can't predict the trajectory of the virus and its ultimate impact on public health and the economy, we have put all appropriate measures in place to position the company for recovery in the third and fourth quarters and beyond," GM CEO Mary Barra said on a July 29 call with investors.
 
The pandemic forced GM and its rivals to close plants for half of the second quarter, which runs April through June. Plants reopened in mid-May. With some dealers in desperate need of inventory, automakers have pushed to resume full production even as they battle high absenteeism amid the continuing pandemic.

 

With state economies shut down for much of the second quarter, GM's sales dipped 34% year over year, but demand for its profit-rich trucks remained "resilient," GM said.

 

GM's retail market share for full-size pickups increased to 36.1% from 35% in the second quarter. The increase happened despite low inventory levels. GM had 120,000 trucks as of July 25, which compares with 270,000 in stock last June and 87,000 at GM's lowest point.

 

GM is upping its production levels of the light-duty trucks at the Fort Wayne, IN, plant starting in September, which will allow the automaker to push out an additional 1,000 full-size pickups a month. Barra said the production increase will add 200 jobs at the plant.

 

As of July 25, GM's overall inventory was lean at 480,000 units, which compares with 810,000 units at the end of the second quarter last year. But the Detroit automaker said that through July 25, landed U.S. dealer stock has grown by 9%, and total vehicles in-transit was up 6%, since June.


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