General Motors reported strong financial results for Q2 2023, with a 52% increase in net earnings compared to the previous year. Despite potential labor stoppages, the company is optimistic about its future outlook.
On July 25, General Motors Co (NYSE: GM) reported its financial results for the second quarter (Q2) of 2023, which were much better than expected, according to the renowned car manufacturer. But the company’s shares didn’t react to the news with an increase. On Tuesday, June 25, 2023, GM stock closed at $37.92 which indicated a 3.51% fall during the day.
According to the Q2 2023 report, General Motors increased its financial guidance for the second time in 2023. Additionally, the company indicated that it is implementing measures to reduce costs by $3 billion for the upcoming year. In 2022, the company’s expenses reached $2 billion.
Q2 2023 Net Earnings of General Motors Increased by 52% Compared to 2022
General Motors reported a net profit of $2.570 billion, representing a 52% increase compared to the same quarter of the previous year. According to the report, the profits were boosted by higher revenues and were affected by an unexpected charge of $792 million related to the withdrawal of the Chevrolet Bolt EV models.
As for revenues, the company reported $44.750 billion, surpassing analysts’ expectations of $42.620 billion. This was mainly due to high selling prices of their new models and the continued demand for their vehicles despite low inventory levels.
General Motors updated its earnings guidance for 2023 for the second consecutive quarter, adjusting it to a range of $12 to $14 billion. They also improved their outlook for operating cash flow and net earnings attributable to shareholders, increasing it from $9.3 billion to $10.7 billion.
Previously, net income attributable to shareholders was in the range of $8.4 billion to $9.9 billion. The increase is attributed to better prices, demand, and capital discipline. However, it will depend largely on GM’s ability to reach new labor agreements with the United Auto Workers and Canadian Unifor unions without any strikes or stoppages.
GM Faces Potential Labor Stoppages
According to CNBC, General Motors could face labor stoppages from the United Auto Workers (UAW) and Canadian Unifor unions, which now have new leadership that appears to be more contentious than their predecessors.
Mary Barra, CEO of General Motors, stated in a letter to shareholders that the company aims to reach fair agreements in contract negotiations with the automotive unions, as they have done for years:
“We have a long history of negotiating fair contracts with both unions that reward our employees and support the long-term success of our business. Our goal this time will be no different.”
Furthermore, a labor stoppage could cost the company millions of dollars again, as it happened in 2019 when they lost over $2.6 billion in earnings before interest and taxes due to failure to reach an agreement with the UAW union.