GM is set to release first quarter earnings this week, with expectations of a somewhat rosy report thanks to an 18-percent increase in sales from a year prior. Nevertheless, GM must also convince investors that it will not engage in a price war with rival electric vehicle producer, Tesla, which has recently introduced numerous aggressive price cuts.
Per a recent report from Reuters, Tesla CEO Elon Musk has implemented a strategy of squeezing the EV producer’s profit margins in a bid to expand sales volume.
As GM Authority covered previously, GM CEO Mary Barra is hoping to cut operating costs by $2 billion over the course of the next two years. To that end, GM rolled out a voluntary separation program (DSP) where in certain GM employees were offered pay, health coverage, and other benefits for a limited time in exchange for voluntarily leaving the company. Reports indicate that roughly 5,000 white-collar workers opted to participate in the new VSP, with GM CFO Paul Jacobson indicating that the program results were in line with expectations and will result in a $1 billion charge for the quarter, with some program costs possibly spilling into the second quarter. The majority of employees participating in the VSP will leave GM by the end of June. According to Jacobson, the results of the VSP will enable GM to avoid layoffs going forward.
Meanwhile, GM has been relatively slow in its all-electric vehicle roll-out, including that for the Cadillac Lyriq crossover. Per previous GM Authority coverage, the slow Cadillac Lyriq roll-out is actually intentional as the automaker fixes teething issues prior to making the bulk of deliveries, including vehicle management software, display screen issues, and a cracking liftgate panel. Only 122 Cadillac Lyriq units were delivered through the entire 2022 calendar year.
Per Reuters, which cites a note from J.P. Morgan analyst Ryan Brinkman, the slow rollout may actually help GM avoid the impact of Tesla’s recent price cuts. However, weak EV prices could still impact the lineup of other automakers and the broader new-vehicle market in general.