New York (AFP) - General Motors raised key 2023 profit projections Tuesday, following a solid first quarter in which robust results in North America compensated for a tough period in China.
The big US automaker continued to ride the wave of strong vehicle pricing in its home market, with lofty revenues from internal combustion engine vehicle sales funding aggressive electric vehicle (EV) expansion and share buybacks.
The company's shares initially jumped on the report, but turned negative after a conference call where it signaled the second half of 2023 could be more challenging.The first quarter saw a $1.3 billion boost from North American pricings.
"April's been very strong for us," said Chief Financial Officer Paul Jacobson, adding that "the risk still lies a little bit in the second half."
But even with that challenge, "we felt comfortable raising our guidance," he said on a conference call with analysts.
GM lifted the forecast for earnings before income taxes and one-time items -- which reflects the profitability of operations -- to a range of $11 billion to $13 billion, half billion dollars up from the earlier outlook.
GM reported profits of $2.4 billion, down 19 percent from the year-ago level but translating to better-than-expected profits per share. Its revenues were $40 billion, up 11 percent.
The company's deliveries rose in North America, which accounted for more than half of overall car sales.
Varied price points
Chief Executive Officer Mary Barra cited strong demand for premium trim versions of pickups such as the GMC Sierra Denali Ultimate, which can sell for more than $80,000.
But Barra also expects that new offerings such as the Chevrolet Trax sport utility vehicle -- which will sell for under $25,000 -- can win over customers from "brands that walked away from affordable vehicles."
GM's North American vehicle deliveries jumped 18 percent.
But sales plummeted in China, where GM cited "challenging industry conditions" in a market that has seen heavy competition.
Barra said China was still recovering from Covid-19, describing pricing pressures there as "aggressive, very aggressive," but predicting that some of more than 100 brands in the country would fall away.
"If you look a little longer from a country perspective, there's still tremendous growth and the market can still be strong and have great profitability potential," she said.
EV 'breakout' year
GM added that it was on track for a "breakout" year in 2023 for EVs, in which no-emission autos shift from a minor component of sales into a meaningful contributor.
The Detroit-based automaker will produce 400,000 EVs over the course of 2022, 2023 and the first half of 2024.
The company did not disclose details on profit margins for its EVs, saying the figures would be more meaningful once production increases.
"We've got a lot of work to do on scaling and all of that is coming together ...picking up speed into the middle and back part of this year," Jacobson said.
As part of its ramp-up, GM plans to retool its Orion Assembly plant in Michigan to build new electric versions of the GMC Sierra and Chevrolet Silverado, both pickups.
The change will end production of the Chevrolet Bolt EV and EUV, two early-generation electric models that start at under $30,000.
Cox Automotive analyst Michelle Krebs described the Bolt decision as "something of a surprise" given that the vehicles have started to show more traction among consumers.
The decision to convert the plant suggests GM is looking to sell larger vehicles that traditionally have enjoyed much strong profit margins that small ones, she said.
GM also said Tuesday that it now sees net income in the range of $8.4 billion to $9.9 billion, down from $8.7 billion to $10.1 billion, due to $900 million in costs tied to a voluntary downsizing program among salaried workers.
GM shares dropped 2.8 percent to $33.35 near midday.
