GM Reports 35% Decline in Q2 Profit Due to $1.1 Billion Tariff Impact

General Motors (GM) has reported a significant 35% drop in its second-quarter profits compared to the previous year, yet the company exceeded Wall Street’s expectations and reaffirmed its full-year outlook. For the quarter ending June 30, GM’s net profit stood at $1.89 billion, or $1.91 per share, down from $2.93 billion, or $2.55 per share, in the same quarter last year. Despite a slight decline in revenue, GM’s figures surpassed analysts’ forecasts, showcasing resilience amid ongoing tariff challenges.

Financial Performance Overview

In its latest financial report, GM revealed a net profit of $1.89 billion for the second quarter, a notable decrease from the $2.93 billion reported in the same period last year. This translates to earnings of $1.91 per share, compared to $2.55 per share a year earlier. When adjusted for certain items, GM’s earnings reached $2.53 per share, comfortably exceeding analyst expectations of $2.34, as reported by FactSet. Revenue for the quarter also saw a slight decline, falling to $47.12 billion from $47.97 billion, yet it still surpassed Wall Street’s forecast of $45.84 billion. Despite these positive results, GM shares experienced a decline of over 3% in premarket trading on Tuesday.

Impact of Tariffs and Strategic Adjustments

CEO Mary Barra addressed the ongoing challenges posed by tariffs in a letter to shareholders, highlighting a net impact of $1.1 billion from tariffs in the second quarter. She cautioned that the third quarter could face even greater impacts due to indirect costs associated with trade policies. GM anticipates total gross tariff exposure of between $4 billion and $5 billion by 2025. To counteract these pressures, GM is implementing targeted cost initiatives, manufacturing adjustments, and strategic pricing to offset at least 30% of its gross tariff exposure. The company has also committed to a $4 billion investment aimed at shifting production from Mexico to U.S. plants, marking its largest domestic manufacturing commitment in recent years.

Electric Vehicle Sales and Future Outlook

In the realm of electric vehicles (EVs), GM reported sales of 46,300 units in the second quarter, a significant increase from 31,900 units sold in the first quarter. This growth comes despite indications of a slowing overall EV market in the U.S. The $7,500 EV tax credit, part of the Inflation Reduction Act, is set to expire for many models in September, which could impact future sales. Barra reiterated GM’s commitment to electric vehicle production, stating, “Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star.” The company has maintained its full-year earnings forecast, projecting adjusted EBIT between $10 billion and $12.5 billion, a figure that was revised downward in May due to anticipated tariff impacts.

Broader Industry Context

The automotive sector is currently facing significant challenges, largely attributed to trade policies initiated during President Donald Trump’s administration, which imposed 25% tariffs on auto imports. Although some of these tariffs were relaxed in April, the administration has initiated a review of potential further levies on foreign-made vehicles and parts. According to the Center for Automotive Research, a uniform 25% tariff could cost the U.S. auto industry an additional $107.7 billion, with major automakers like GM, Ford, and Stellantis expected to bear a substantial portion of this burden. In a related development, Stellantis has projected a net loss of €2.3 billion ($2.68 billion) for the first half of the year, primarily due to tariffs and other charges, with formal results expected to be released on July 29.

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