GM reports strong sales but says it is prepared for possible recession
“We have also modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” she said.
GM does not yet see any signs of a recession, given the strong demand for new vehicles, Chief Financial Officer Paul Jacobson said in response to questions from the media.
“We don’t see any signs of trouble in the near term, but we have to be aware of the noise that’s out there and what other people are seeing,” he said. “We’re going to be very nimble and very nimble and respond to that.”
Jacobson would not offer an opinion on the chances of a recession in the next year, saying “I don’t like to get into the odds to predict. Our job is to react and plan and prepare.”
He said all customer data, including credit reports from GM Financial, show much continued strength among American consumers and pent-up demand to buy vehicles.
“But we’re watching and we’ll make sure we adjust the business as needed as well,” he added.
GM sought to reassure investors, saying it expects to meet its full-year earnings target, despite financial concerns.
“We feel like we’re in a really good position,” Jacobson said. “We feel we are on track to deliver the year we [forecast] at the beginning of the year.”
Decrease in profit despite increased income
But revenue rose $1.6 billion to $35.8 billion, easily topping forecasts that called for a drop in revenue. The number of vehicles sold worldwide by GM’s dealers and distributors was roughly in line with first-quarter sales, but was down 19% to 1.4 million from a year ago.
The limited supply of vehicles and strong demand, especially in North America, drove up prices. The strong pricing environment added $1.8 billion to the company’s results during the quarter.
Part of the decline in vehicle sales was due to the shutdown in China, and part of it was due to continued shortages of computer chips and other necessary supplies. The company had 95,000 vehicles that it built in the quarter, but could not finish due to parts shortages. About 75% of those are pickup trucks and full-size SUVs, GM’s most profitable vehicles. Jacobson said the company expects to complete those vehicles and sell them in the second half of the year, already making progress so far this month.
“We thought we were going to produce a lot more vehicles in the quarter,” he said. “Probably all of these vehicles will come back in the second half of the year.”
GM lost $87 million in China, its first loss there since early 2020 at the start of the pandemic.
