G.M.’s Profits Fell 18.5 Percent in the First Quarter
General Motors reported an 18.5 percent drop in profits in the first quarter, mainly because of the cost of job cuts and slowing new-vehicle sales in China.
The decline comes as higher interest rates raise the cost of new vehicles for consumers and worries persist about a possible recession in the United States.
G.M. said its net income in the first three months of the year fell to $2.4 billion, from $2.9 billion in the same period in 2022. Revenue in the first quarter rose 11 percent, to $40 billion, thanks to higher prices and effective discounting.
“The first quarter came in ahead of our own expectations, primarily as a function of pricing and a consistent incentive plan, as well as demand remains strong for our vehicles,” G.M.’s chief financial officer, Paul Jacobson, said in a conference call.
Globally, G.M. sold 1.4 million vehicles in the first quarter, 3 percent fewer than the same period a year ago. Its U.S. sales rose 18 percent but its sales in China fell 25 percent.
The automaker’s first-quarter earnings were lowered by $900 million which G.M. had set aside to cover the cost of severance and other measures resulting from its elimination of 5,000 salaried jobs. In total, G.M. is trying to cut about $2 billion a year in costs.
The effect of those cost-cutting efforts, Mr. Jacobson said, is “flowing to the bottom line quicker than we anticipated.”
G.M. lowered its outlook on 2023 slightly. The company said it now expects 2023 net income to range from $8.4 billion to $9.9 billion. In January it gave a range of $8.7 billion to $10.1 billion.
The auto industry’s trajectory remains uncertain. In the United States, sales of new vehicles rose about 7 percent in the first quarter, to 3.6 million vehicles. But the pace of sales slowed noticeably by March. Much of the increase had stemmed from purchases by rental-car companies and other commercial fleets, rather than individual customers.
Rising interest rates and near-record prices have made it hard for many U.S. consumers to afford new cars and trucks. In March, car buyers paid an average of $48,008 for new vehicles, up nearly $1,800 from March 2022, according to Kelley Blue Book, a market researcher. The average monthly payment on new cars last month was $784, compared with $683 a year ago.
While G.M.’s U.S. sales rose in the first quarter, signs of softening consumer demand in the broader market have started to appear. Last week, AutoNation, the largest auto retailer in the United States, said its new-vehicles sales fell 2 percent in the first quarter.
“There is a lot of mixed economic signals in the market, and within auto retail, which do warrant, I think, a more cautionary approach than the past few years,” AutoNation’s chief executive, Mike Manley, said in a conference call.
G.M. is hoping for a surge in sales of electric vehicles later this year. In the first quarter, the company sold more than 20,000 E.V.s in the United States. Mr. Jacobson said G.M. expected E.V. sales in the first half of the year to top 50,000, and about double that in the second half.
“We feel good about the demand being robust for the electric vehicles we are producing,” he said.