Quiver Quantitative - General Motors (NYSE:GM) has recanted its 2023 profit forecasts amid escalating pressures from the United Auto Workers (UAW) union and a paradigm shift in its electric vehicle (EV) approach. This decision came shortly before UAW initiated a strike at GM's Arlington, Texas plant—a facility renowned for producing lucrative SUV models like the Cadillac Escalade. UAW's decision, triggered by GM's recent financial results surpassing expectations, seeks to escalate pressure on the automotive giant to amend its contract offers, particularly following the company's proposal of a 23% wage increase spanning 4.5 years.
The ongoing UAW strike threatens to drastically inflate GM's financial burdens, pushing the weekly costs due to the strike beyond the $200 million estimate previously shared by GM executives. Responding to the union's demands, Mary Barra, GM's Chief Executive, delineated the company's proposed contract that she believes would allow U.S. factory workers to garner as much as $84,000 annually. Nevertheless, Barra emphasized the corporation's commitment to ensuring the pact's fairness to both its employees and shareholders. Despite the labor-related tumult, GM posted a third-quarter net income of $3.06 billion, reflecting a 7.3% decline, whereas its revenue saw a 5.4% increase, amounting to $44.1 billion.
Navigating the uncertainties of the EV market and the headwinds from labor disputes, GM is recalibrating its electric vehicle ambitions, especially as the EV sales growth rate wanes in North America. GM's revised strategy includes delaying the launch of certain EV models to streamline costs and retracting from aggressive expansion goals, which initially sought to challenge Tesla (NASDAQ:TSLA)'s supremacy in the U.S. EV domain. A testament to this strategic shift is GM's decision to redesign the Chevrolet Bolt EV to integrate more cost-effective lithium-iron batteries and its rescission from a commitment to manufacture 400,000 EVs between 2022 to mid-2024.
Though GM's sales metrics in North America appear resilient, with average selling prices for their vehicles pegged at $50,750 in the recent quarter, the firm admits to the adversities it's grappling with. The increased costs associated with EV launches, heightened warranty expenses, and reduced pension income in the past quarter have eroded a significant $1.5 billion from GM's quarterly profits. In the midst of these transformations and challenges, GM, alongside other automakers, is lobbying the Biden administration to reconsider stringent emissions and fuel efficiency standards aiming for EVs to dominate two-thirds of the U.S. vehicle market by 2032.
This article was originally published on Quiver Quantitative