General Motors lost $806 million and burned through billions of dollars of cash in the 2nd quarter in what is anticipated to be the worst three months of the year for the auto market as the pandemic shuttered factories and ravaged sales.
GM’s results launched Wednesday showed a 34% drop in U.S. car sales, which the company attributed to a drop in demand “due to the pandemic and tight dealer inventories caused by the production shutdown in the first and second quarters.”
GM’s loss is a sharp contrast to the $2.42 billion revenue it made during the exact same three months in 2019. Profits throughout the 3 months ended June 30 moved to $16.78 billion, a more than 53% drop from $36.1 billion throughout the exact same time in 2015.
However, the loss isn’t as bad as Wall Street feared and help drive shares up by more than 4% in premarket trading. On an adjusted basis, the business lost 50 cents a share while analysts expected the automaker to lose $1.77 a share.
Suryadevara explained the second quarter as an “remarkable time” for the international automotive market.
GM initiated a “zero-based budgeting” procedure to preserve money throughout the first half of the year. Those actions included considerable cuts to marketing and other discretionary spending, payment deferments and worker furloughs.
Some of those cost-cutting procedures will be long-term, according to Suryadevara. She decreased to forecast a monetary quantity of those cost savings for the business, which is in the middle of a $6 billion cost-cutting strategy through 2020.
“When you step back and look at these results, we believe this demonstrates the actions we’ve taken over the past few years to be more resilient, to reduce our fixed costs and to lower our break-even point and really improve our earnings power so we can invest in our future,” she said.
GM prepares to invest $20 billion from 2020 through 2025 in autonomous and all-electric cars.
Ahead of the release, Bank of America Merrill Lynch analyst John Murphy stated he expected the 2nd quarter would likely be “the most difficult in history” for the automotive industry, keeping in mind that companies “faced close to a zero income environment for a few months.”
Other financiers and industry executives have actually likewise called the 2nd quarter “unmatched,” and likely the worst 3 months of the year.
Of the Detroit automakers, GM was expected to be finest placed to weather a crisis as huge as the pandemic. For several years, the automaker has aggressively cut expenses and left unprofitable markets, including Europe, to strengthen its balance sheet.