GM Focusing On Profits Over Volume With Further Cost Cutting
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GM has announced it will place a greater emphasis on maximizing profits over sales volume as it eyes further cost-cutting measures through the end of the year. The automaker raised its full-year profit guidance this week, stating that it plans to trim an additional $1 billion in costs. The announcement follows the release of the automaker’s second-quarter 2023 earnings.
Highlights from GM’s Q2 2023 earnings report include $44.7 billion in revenue, $2.6 billion in net income attributable to stockholders, and EBIT-adjusted of $3.2 billion. Net income increased 52 percent year-over-year, while revenue increased 25 percent year-over-year. GM also updated its full-year guidance, forecasting $9.3 billion to $10.7 billion in full-year net income, up from $8.4 billion to $9.9 billion forecast prior. GM predicts net income of $7.15 to $8.15 per share for the year, an increase from $6.35 to $7.35 per share.
Per a report from Reuters, GM’s revised outlook arrives on the heels of stronger demand and richer pricing over the last six months, as indicated by GM CFO Paul Jacobson.
“There’s a lot of focus on winning with simplicity,” Jacobson said.
GM plans to spend between $11 billion and $12 billion in capital investments this year, about $1 billion less than the initial projection of $11 billion to $13 billion. The automaker did not specify which projects would be cut. In addition, Jacobson said that GM will expand cost-cutting efforts by $2 billion through the end of the 2024 calendar year, targeting an additional $1 billion in overhead, marketing, and other costs.
“We’re focused on profitability,” Jacobson said. “Our recent results demonstrate that we’re not sacrificing margin for volume. We will continue this strategy to help drive a fundamentally stronger company beyond 2023,” he said.
GM also announced that it would cover more of the costs associated with the Chevy Bolt EV battery recall. The General said the latest Q2 2023 results include “a $792 million charge for new commercial agreements” with South Korean battery maker LG Energy Solution.
“The charge reflects the conscious decision GM made during the Chevrolet Bolt EV and Bolt EUV recall to serve customers in ways that go beyond traditional remedies, and GM is taking new steps that will reduce its costs and improve EV margins over time,” GM states.
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Been looking at all the 22s still rotting on the lots. It looks like gm don’t care about moving them for the dealers found 23s are cheaper.
GM should focus on building and shipping sold orders. First and foremost! They focus on everything but their customer.
i don’t know where your at but dealers here can’t keep vehicles on the lots. They get a bunch and then they are gone. GM may have some 22’s in some areas but most dealers in Ohio have very few if any older vehicles.
There’s not much on the lots because that’s how they want it. They aren’t going to fill the dealerships anymore which means no deals and no good leases. The cars that come in were already ordered by the customer. If 8 cars come in on the truck, 6 or 7 of them were ordered by a customer. Ford is doing the same thing.
How about some actual data showing us “all the 22’s rotting on the lots”. I find this hard to believe considering the current inventory levels.
There were hundreds of 22 silvys within 250miles of me a couple of 2weeks ago chevy has since taken them off there website.
Chevy probably sold them then. Sales are pretty strong just look at the numbers.
Maybe he’s referring to the thousands that have been sitting unfinished on factory lots rather than dealer lots. What happened to all of those?
They were finished and sold.
Really, I’ll drive by and take a look.
All those 22s did not sell. gm took them down because they are no longer going to put any incentives on them. they were only still on there that long because a lot of them were “built shy of parts” and did not get finished and shipped till this year. It is up to the dealers to now discount them or keep adoring them.
Very possible that those huge profits are vanishing. The Federal Reserve just raised rates again and that will further decline sales. Until prices drop and/or incentives get larger.
Agree, as interest rates increase there will be fewer buyers. So fewer sales means lower revenue which will please no one. When profit per vehicle drops you have to sell more vehicles to keep revenue up. In the past that meant increasing the incentives which Mary wants to avoid because that drives down the profit per sale. She has already said she won’t follow that model. Her way only works if you have a product that people will pay a premium for and that’s a huge gamble. The real answer is in the middle somewhere . But she’s already shown that she’s a gambler by staking so much on an all EV conversion by 2035. We will see.
I don’t think it’s as simple as limiting production to keep prices up, because if your competitors lower their prices they take your market share and that’s hard to take back. I believe market share is just as important as profit. Even if you just break even during hard times but maintain your market share you can bounce back more quickly. Plus you maintain efficiency and harmony by keeping everyone working.
She’s a gambler…..yeah, with other peoples money and jobs, whatever happens she’ll still remain super wealthy….so she’s not exactly risking much.
This is like playing Russian roulette with someone else’s head…..
She will have to follow that model. Most of what she says is politics with the investors.
Back to 2014, with the release of the K2XX trucks, Mary said the exact same thing. Sales tanked, next month incentives were high.
The reason shes saying this is to make the appearances of a “new gm” that doesnt behave like the GM of the 2008 collapse that some blame on high vehicle incentives. I disagree the incentives caused the bankruptcy. They were just a symptom, but what shes afraid of is big banks pulling their stock ownership.
Toyota, Stellantis, and Huyndai thank you!
This only works in an environment where the consumer is willing to pay “whatever” to get a vehicle. That environment is rapidly deteriorating.
Coming up, consumers will go to has the best deals coinciding with availability. If GM has neither, then they will be toast.
I’ve been saying the Koreans are going to keep eating GM’s lunch, and recent market share results should be absolutely shocking to GM executives. Heads in the sand? … And the UAW is probably going to make GM their chief target for the benchmark deal.
The Koreans are salivating.
Over what? Toyota market share? Koreans dont really have any vehicles is the classes GM has dominated in. Theyre all small cars and smaller crossovers. GM has struggled in the sedan and compact class since, errr…. It was invented???? Theyve always been trucks and muscle cars, and latter SUV’s. Whos really in trouble is ford who has much smaller margins on the F150 than GM does on their trucks.
You’re an ignorant fool. Trax, Trailblazer, Encore GX, Equinox, Envision, Blazer, Traverse/Acadia/Enclave, Bolt, just to name a few, are all competing in their respective classes with Korean rivals. Koreans also have more vehicles in each segment, along with a CUV trucklet.
If GM wants to hang it’s ENTIRE business model on 1/2+ trucks and SUVs, as Billy Bean in Moneyball said: “Then what’s the point?”
The company IS NOT a low-volume, highly-desirable, expensive luxury car manufacturer. If GM tries this, it will die.
Bud, i said dominated in. They always had cars in every class, but we see how the vega went, sonic, aveo. None ever touched the toyota/honda small car empire. Thats where the biggest opportunity for koreans to pick up sales. In the meantime, nothing in kia nor hundais line matches the price or sexiness of the new trax.
GM is beyond stupid.
You can’t make profits off a no sale. As the economy continues to deteriorate your wicked greed will come back to bite big time.
Thats my question. Dont you have to move volume to make a profit? Seams like a lame excuse for the reason their product isn’t selling well. FYI that excuse might work for media, but not stock holders.
GM won’t be adjusting the volume of vehicles built in there most profitable shops. Take Flint for example, HD trucks make huge profit for GM. We will not be building any less on a daily basis, just less low content and fleet sales. Less single cab work trucks and more loaded out Denalis. And they will be focused on running positive numbers off of assembly lines and cutting unscheduled overtime. In the past, when GM said volume, that meant dumping low content fleet sales on rental lots. The entire time GM built the Chevy Cruise, in November and December all we built were fleet sales. Lost a lot of money doing that.
Ironically the recent surge in sales at GM & other automakers has been driven by fleets……. Not thrifty spending consumers.
When those Denalis rot on the lot GM will think twice before going all in on rich people only vehicles.
I have seen very little GM cars in any fleet. Not even the rental companies have them. I mostly see Honda and Chrsyler Minivans. Toyota camry’s, Nissan trucks and lots of Kia and Hyundai suv’s and cars. Very few Malibu’s or any of there SUV’s. Yes they sale to government Fleets and they should because they are a american company. Dealers here are selling everything they get.
????? With National/Engerprise/alamo and Hertz/Avis/thrifty the most common sedan is the Malibu. The most common SUV’s are buicks and they always have a line of tahoes ready to go. Kias ive only seen at Dollar, and toyota has very few camrys and a lot of corrollas. Either your in a different world or just showing up late in the day when all that is left is the crapy cars.
But you’re wrong though.
GM will build a stock unit for a dealer even though another dealer has the same vehicle sold. Why not build the sold unit??? Makes no sense whatsoever. Plus, they have no dealer loyalty. They will give a new dealer more inventory than the dealer that’s been with them for 30 years.
When a company says they are focusing on profits all I hear is “we want to give you as little as possible for as much money as possible”. That’s lose lose for customers.
The Koreans might only be able to beat them in crossovers and SUVs, but there are other fullsize trucks on the market. I’d never buy a Ram, but they are discounting those to all hell again and next year they might even have a competitive engine again.
Market share GM. Market share.
The Hemi is very competitive motor. It makes more power than the 5.3 but doesn’t require premium like the 6.2.
Uhmmmmm, yes, it does run on premium.
The hemi is basically a hot rodded 5.3. It comes from the factory with a 3” exaust, or basically a “cat back” a hotter cam, thus the chewed up camshaft problem of the hemi, and runs on 89, not 87 octane. It runs its torque a little higher with the more agressive cam and when you put regular in it, it looses a ton of power. When your towing, and getting 9mpg, your not running on mid nor high grade so the 5.3 makes better towing power than the hemi.
Likewise the 6.2 doesnt require premium. It just makes full power on premium. You can daily drive in 87, and tow light loads on 87. Ditto with fords 5.0 that makes 400HP. It only does on premium. On 87, it makes less torque than the 5.3
They better get as lean as possible. Their EV sector will be in the red for decades. Only their large ICE SUV and truck lines will keep them afloat.
“increased profits while not worrying about sales volume”…..music to FORD’s ears and exactly the stupid managerial tactic the Brazilians pulled that are running Anheuser-Busch/InBev resulting in the biggest loss in beer-brand equity since the Volstead act was repealed in 1933. Must be the latest “Fad” the bozo’s at the MBA-factory schools like Wharton are preaching.
This kind of announcement is to shore up the stock. Every now and then, big corporations need to reduce cost by cleaning house. Some departments were allowed to grow during good times and are now bloated. Office space is another expense that can get out of hand. However, this announcement of cost reduction make no mention of production of vehicles. Another jab is yesterday the Federal Reserve raised interest a 1/4%.
So Mary’s dream is to give up market share and become a niche player? That’s a dangerous game that can lead to a spiraling crash. GM needs new leadership.
It says that no where at all. They however are making a profit which is the most important thing for any company.
When you intentionally limit production to keep profit per vehicle up you are giving up sales which is market share. This only works until your competitors drop their prices. Then to keep sales you have to drop prices too. So you end up with fewer sales because you limited production and now you are also giving up profit per vehicle which is a double hit. Her strategy only works when certain conditions exist which are usually temporary. A very dangerous game that can go bad very quickly.
Typical short term focus on profits. If that means they’re going to use the sh*t-show product launch and production of the 2023 Chevy Colorado and GMC Canyon as their profitability model, in 10 years GM will be at most a shell of its former self.
History is littered with companies who decided to “focus on profits” and those companies ended up out of business or bought by someone else.
GM spent several decades selling the most cars and yet went bankrupt. In these future sales will slow due to higher cost and inflation. It will really matter that companies see a good profit.
Market share did not save GM at the end of the day.
The reason they went bankrupt was the unions. Back in 2002 they saw the forecast of fuel prices was going to get higher, but the unions threatened to strike if they retooled to fuel efficient cars instead of SUV’s which required more union workers. They also threatened to strike if GM cut hours. Thus GM was producing millions of vehicles nobody wanted and selling them at a loss to recuperate to pay union wages.
I bought 2 new ones during that time to take great advantage. The second one was an 09 Pontiac G-6 which I got $9500 off of MSRP with rebates, GM card, and GM employee discount. The finance manager told me that was the most discount he had seen on a new car. I wrote the check and drove it home. I still have that car today as a backup but my 14 year old granddaughter has her eyes on it for her first car……. she will probably get it.
Hey Steven, another Steven here. Interesting that you think the unions mortally wounded GM in the early 2000s. Last I checked the unions have almost no say in what the company is going to build. The concept that the union told GM they had to build SUVs instead of fuel efficient cars and that GM ‘”bowed to their wishes” is really funny. They built SUVs because they believed they could make more money doing so. GM, as most US large corporations works primarily for the stockholders and stock prices, as that is what decides executive salaries and bonuses. GM works with the UAW to the extent they have to, but they sure don’t take ‘orders’ from them. The economic mess of 2007 to 2009 is mostly what mortally wounded GM and that was a function of bankers and financiers, not the workers.
So what happened when GM was failing? The union that you like to blame stepped up to help out GM (yes, it was in their best interests also) and went years without wage increases . The UAW had a much larger role in saving GM then they did in wounding it.
GM doesn’t do everything right and neither does the UAW. GM isn’t out to kill the unions and the UAW is even less out to kill GM. The UAW us not one unitary voice. If you run the locals at Flint Assembly or Arlington, you are pushing as hard as you can for GM to build more trucks and suv’s. If you ran a local at Lordstown or Detroit Hamtramcyk you were pushing for cars. Everyone, including GM execs are trying the best to save their own jobs and prosper.
Funny how some people like to blame everything on unions. Do you also believe Marjory Taylor Greene that most of the world’s problems were caused by George Soros and those Jewish space lasers? Get a grip man.
One million thumbs up for this comment!! Thank you.
We buy work trucks for our companies. One of our acquisitions picked out a $90K pickup – we said, “no.” They said, “it is just like we always used to get, and that the employees expect and are ‘entitled’ to it.” We still said, “no.” We are not buying Denali pickups for employees. GM can make them all they want, and they can sit on the lot.
Think about a payment on a $90K truck for most people.