GM Withdraws Annual Forecast as UAW Strike Intensifies, Impacting Earnings

Essential Highlights

• General Motors (GM) has retracted its annual financial guidance in the latest quarterly earnings report, citing uncertainties from the expanding United Auto Workers (UAW) strike.
• GM reported a third-quarter net income of $3.06 billion, marking a 7% decline year-over-year, partially attributed to strike-related disruptions.
• Following the earnings announcement, the UAW extended its strike to GM's largest manufacturing facility.

General Motors Co. (GM) announced the withdrawal of its full-year forecast in the third-quarter earnings report released on Tuesday, reflecting growing uncertainty amid the intensifying strike led by the United Auto Workers (UAW) union.

"Due to the prevailing uncertainties, we have decided to retract our 2023 full-year guidance, despite strong business fundamentals that initially suggested performance in the upper range before the strike's impact," stated GM Chief Financial Officer Paul Jacobson during the earnings call. Previously, GM projected adjusted earnings before interest and taxes (EBIT) between $12 billion and $14 billion for the year.

GM's third-quarter profit stood at $3.06 billion, down 7% compared to the previous year, influenced by operational disruptions caused by the UAW strike. The company reported a $200 million impact from the strike during the first two weeks of the quarter and anticipates approximately $200 million in weekly losses if the strike's scope remains unchanged as of October 23. For the fourth quarter, GM estimates production losses around $600 million.

Revenue for the quarter reached $44.1 billion, reflecting a 5.4% increase year-over-year and slightly surpassing market expectations. Earnings per share (EPS) also exceeded forecasts at $2.28, up 1.3% from Q3 2022.

Shortly after the earnings release, the UAW expanded its strike to include 5,000 workers at GM's largest plant located in Arlington, Texas.

The UAW strike, involving GM, Ford, and Stellantis, began on September 15 and is now in its sixth week, with over 45,000 workers participating. According to the Anderson Economic Group, the strike has potentially caused $9.3 billion in economic losses for the automotive sector.

In the earnings call, GM also revealed plans to decelerate its electric vehicle (EV) transition amid the ongoing strike, aiming to "moderate the pace of EV acceleration in 2024 and 2025 to sustain strong pricing."

Previously, GM postponed the conversion of its Orion Assembly plant for EV production from 2024 to late 2025. Analysts warn that the UAW strike may hinder the Big Three automakers' competitiveness in the EV market, especially against rivals like Tesla.

However, this slowdown in EV transition might reassure investors concerned about GM's aggressive EV investment strategy. Equity Research Analyst Garrett Nelson from CFRA noted to Investopedia that GM's more measured, market-driven approach contributed to CFRA upgrading the stock from "sell" to "hold" following the earnings announcement.

Explore useful articles in Company News as of 29-10-2023. The article titled " GM Withdraws Annual Forecast as UAW Strike Intensifies, Impacting Earnings " offers in-depth analysis and practical advice in the Company News field. Each article is carefully crafted by experts to provide maximum value to readers.

The " GM Withdraws Annual Forecast as UAW Strike Intensifies, Impacting Earnings " article expands your knowledge in Company News, keeps you informed about the latest developments, and helps you make well-informed decisions. Each article is based on unique content, ensuring originality and quality.