General Motors’s quarterly profits may have tumbled nearly 90 per cent, but US truck sales strengthened and the automaker is keen to build more when US and Canadian plants reopen this month.
Sales at GM declined 6 per cent overall to $32.7bn in the first quarter, the company said on Wednesday, while sales in the US declined 7 per cent. Yet US sales for full-size pick-up trucks rose 27 per cent from the same period a year earlier.
Chief financial officer Dhivya Suryadevara said the company is selling more vehicles in states not located on the US coasts. The Detroit automaker is watching where dealers are selling vehicles, and which models, and that will guide how GM ramps up production when it reopens US and Canadian plants on May 18, initially with a single shift per day.
“As we come back online we will prioritise trucks . . . as well as geographies that are running light from an inventory standpoint,” she said. “From a dealer inventory and sales perspective, you cannot paint the entire country with the same brush.”
Imported brands are traditionally more popular in coastal states, which so far have been hit harder by the pandemic. Governors there also moved more quickly to impose stay-at-home orders.
“The states that shut down later are the ones where full-size pick-ups are more popular,” said Fitch Ratings analyst Stephen Brown. “Texas having closed down later, that probably benefited the Detroit Three,” he added, referring to GM, Ford and Chrysler.
GM’s net income in the first quarter fell 87 per cent to $294m, which nevertheless bested the billions in losses posted by its two rivals. It also beat Wall Street’s profit expectations. Analysts polled by FactSet expected an adjusted profit, which excludes certain items, of 40 cents per share, but the carmaker reported earnings of 62 cents.
The company said that the pandemic lowered its earnings before interest and taxes by $1.4bn, and chief executive Mary Barra said GM expects “an even greater impact in Q2 because of the production stoppage, a phased restart and what we believe will be lower market demand”.
Ms Suryadevara said in a scenario where global auto production is down between 60 and 70 per cent, GM will see a cash outflow between $7bn and $9bn in the second quarter.
GM shares rose nearly 5 per cent to over $22.
GM’s announcement that it would join Fiat Chrysler in restarting US and Canadian plants on May 18 means Ford is likely to follow suit, given that the carmakers all work with the United Auto Workers union.
UAW president Rory Gamble said on Tuesday: “The companies contractually make that decision, and we all knew this day would come.”