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GMC Hummer electric vehicle on the production line at General Motors’ assembly plant in Detroit.
General Motors reported second-quarter earnings rose 59%, and the company raised its full-year earnings outlook.
The company said its adjusted earnings reached $2.7 billion, or $1.91 per share. That’s up from the $1.7 billion it reported a year earlier. Analysts surveyed by Refinitiv had forecast earnings per share of $1.85 for the quarter.
The company also said it now expects to earn between $9.3 billion and $10.7 billion for the full year, significantly higher than its previous outlook for revenue between $8.4 billion and $9.9 billion.
However, these revenue projections could be derailed if the company is hit by a strike by the United Auto Workers union. The current labor pact expires on September 14, and the talks are already off to a contentious start.
UAW President Sean Fain said the union is prepared to strike if the company does not meet its demands. A six-week strike against GM in the final round of talks in 2019 cost the company a reported $2.9 billion.
The strong revenue and earnings outlook could pose a challenge to GM at the bargaining table by prompting the union to take an even harder line in its demands. The union wants to end a lower wage and benefit level for some hourly workers and a return to cost-of-living adjustments to protect workers from inflationary pressures.
But this is a good time for car manufacturers – and the union knows it. Demand for vehicles remains strong and prices are at or near record levels. GM’s global auto sales rose 12% to 1.6 million vehicles, and revenue rose even more, rising 25% to $44.7 billion, topping forecasts by $2.1 billion.
“The biggest driver behind our financial performance is customer demand for our vehicles,” CEO Mary Barra said in a letter to employees.
GM also faces a contract expiration in September with Unifor, which represents hourly workers at its Canadian plants. Barra took a moment during the call with investors to thank members of both unions. “There is a direct correlation between their hard work and our success,” she said. And she promises to enter into new agreements with both unions.
“We have a long history of negotiating fair contracts. It is the best possible outcome for everyone, she said. – We look forward to constructive conversations.
The company took a $792 million charge related to a recall of the Chevy Bolt to replace the EV battery, due to the fire hazard posed by the electric vehicle. LG, the company’s battery supplier, had already agreed to pay GM $1.9 billion to cover most of the costs of the recall. The latest charge reflects a change in the agreement with LG.
“The addition reflects the conscious decision we made during the recall to serve our customers in ways that go beyond traditional solutions, and we are taking new steps that will reduce GM’s costs and improve our EV margins over time,” Barra said. GM replaced the expensive EV batteries in the recalled bolts.
The company reached the target of 50,000 electric cars in North America in the first half of the year and is on track to produce 100,000 electric cars for the market in the second half of the year. But that’s still a fraction of total deliveries, as it sold a total of 1.5 million cars in North America in the first half of the year.
Shares rose in pre-market trading.