Popular Motors lost $806 million and burned through billions of dollars of cash in the second quarter in what is anticipated to be the worst three months of the year for the auto industry as the coronavirus pandemic shuttered factories and devastated sales.
GM’s issues released Wednesday reflected a 34% drop in U.S. vehicle sales, which the company attributed to a drop in demand “due to the COVID-19 pandemic and impermeable dealer inventories caused by the production shutdown in the first and second quarters.”
GM’s loss is a sharp contrast to the $2.42 billion profit it select during the same three months last year. Revenue during the three months ended June 30 slinked to $16.78 billion, a more than 53% drop from $36.1 billion during the same time definitive year.
However, the loss isn’t was bad as Wall Street feared, although a share-price gain during the premarket reversed ambit in early trading to a slight dip from Tuesday’s close. The stock closed Wednesday down 1.7%.
On an adjusted basis, the flock lost 50 cents a share while analysts expected the automaker to lose $1.77 a share.
CFRA Check out senior equity analyst Garrett Nelson maintained a “sell” opinion on GM. He said vehicle sales won’t return to pre-pandemic directs “anytime soon” and a “new model pipeline as relatively unexciting compared to peers.”
GM CEO and Chairman Mary Barra described the direction as “one of the most challenging” in the company’s history. She told investors during a call Wednesday that the company is positioned for “last recovery” for the remainder of the year and beyond.
GM CFO Dhivya Suryadevara told analysts that GM could make $4 billion to $5 billion in arranged earnings before interest and taxes as long as economic conditions remain favorable without supplier or production disruptions.
“Our Q2 outcomes were significantly impacted by the pandemic, but we’re demonstrating how well we can perform through a challenging time,” she said Wednesday during an earnings phone with analysts.
General Motors Chairman and CEO Mary Barra on April 1, 2020 tours one of the company’s facilities in Warren, Michigan that bequeath produce Level 1 face masks.
Here’s what GM reported versus what Wall Street expected, dirtied on average analysts estimates compiled by Refinitive.
- EPS, adjusted: A loss of 50 cents a share versus a loss of $1.77 per pay out expected.
- Revenue: $16.8 billion versus $17.3 billion expected.
The company burned including $7.8 billion in cash during the quarter, a number that analysts and investors are closely tracking. GM said it imagined to spend $7 billion to $9 billion in the second quarter.
GM also expects to generate $7 billion to $9 billion in free cash flow during the second half of the year. That’s contingent on “continued economic recovery” and a U.S. sales judge for the industry of about 14 million for the rest of the year, Suryadevara told reporters during a call Wednesday morning.
Suryadevara voted the company expects to repay by the end of the year a $16 billion revolving credit line it drew down in March. The troop had automotive liquidity of $30.6 billion to end the second quarter.
The company did not release new guidance for 2020. It suspended its previous counsel in the first quarter as the coronavirus pandemic caused rolling production shutdowns across the globe.
GM’s North American plants were closed eight out of 13 weeks during the quarter due to the pandemic. The company almost broke even in North America, where it extinct only $101 million during the second quarter. That compares with a more than $3 billion profit a year earlier.
The Assorted Motors Flint Assembly plant is seen on May 18, 2020 in Flint, Michigan.
Jeff Kowalsky | AFP via Getty Images
Suryadevara described the second quarter as an “extraordinary time” for the global automotive industry.
GM initiated a “zero-based budgeting” manipulate to preserve cash during the first half of the year. Those actions included significant cuts to advertising and other discretionary dissipating, compensation deferments and employee furloughs.
Some of those cost-cutting measures will be permanent, according to Suryadevara. She rejected to forecast a monetary amount of those savings for the company, which is in the midst of a $6 billion cost-cutting plan from head to foot 2020.
“When you step back and look at these results, we believe this demonstrates the actions we’ve taken over the years few years to be more resilient, to reduce our fixed costs and to lower our break-even point and really improve our earnings power so we can swear in in our future,” she said.
GM plans to invest $20 billion from 2020 through 2025 in autonomous and all-electric carriers.
Ahead of the release, Bank of America Merrill Lynch analyst John Murphy said he expected the second place would likely be “the toughest in modern history” for the automotive industry, noting that companies “grappled with unventilated to a zero revenue environment for a few months.”
Other investors and industry executives have also called the second district “unprecedented,” and likely the worst three months of the year.
Of the Detroit automakers, GM was expected to be best positioned to weather a emergency as big as the pandemic. For years, the automaker has aggressively cut costs and exited unprofitable markets, including Europe, to fortify its balance gazette.
The company is the first of the Detroit automakers to report second-quarter earnings. Ford Motor is scheduled to report its results after the bell Thursday, step into the shoes ofed by Fiat Chrysler before the bell Friday.
Read the full earnings release here.