General Motors' profits fall by a third after $1.1bn hit from tariffs
General Motors' second-quarter core profit fell 32 per cent to $3 billion as it continued to deal with the fallout from Trump's tariff policies. Earnings in its US business, the company's main profit centre, suffered from import duties on cars made in Canada, Mexico and South Korea.
The Detroit-based carmaker expects the tariff impact on profits to worsen in the third quarter and repeated a previous estimate that trade headwinds will cost it up to $5 billion. However, it is aiming to mitigate at least 30 per cent of that impact through manufacturing adjustments, targeted cost initiatives and pricing.
Mary Barra, chief executive of General Motors, said they were attempting to 'greatly reduce our tariff exposure', citing $4 billion of new investment in the automaker's US assembly plants.
The carmaker expects to build more than 2 million vehicles in the US each year after it scales production.
Paul Jacobson, chief financial officer, said: 'Over time, we remain confident that our total tariff expense will come down as bilateral trade deals emerge and our sourcing and production adjustments are implemented.'
Shares of General Motors fell $3.69, or 6.9 per cent, to $49.52 in morning trading in New York.
The automaker's revenue in the three months to the end of June fell nearly 2 per cent to about $47 billion from a year ago. General Motors said it dealt with higher warranty costs during the quarter, which was partly due to an increase in warranty claims from software issues on some of its early electric vehicle launches.
• Nvidia's Jensen Huang unveils superchip and General Motors tie-up
EV sales totalled 46,300 in the second quarter, up from 31,900 in the first quarter. However, overall in the United States, EV sales growth has begun to slow. The $7,500 EV tax credit under the Inflation Reduction Act is set to expire in September for many models.
'Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star,' Barra wrote in a letter to shareholders.
'As we adjust to changing demand, we will prioritise our customers, brands, and a flexible manufacturing footprint, and leverage our domestic battery investments and other profit-improvement plans.'
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