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General Motors has engine trouble.
In its third-quarter earnings report Tuesday, the legacy carmaker announced a smidge of good news encased in a truck ton of bad news. While both net income and revenue beat analyst expectations, profits were still down 7% from a year ago, and the ongoing United Auto Workers' strike is eating away at cash flow. Oh, and its electric vehicle targets may have been wildly optimistic. And did we mention the woes of its self-driving car unit?
Detroit Flop City
The good news is that GM generated about $3.1 billion in profit in the quarter. The bad news is that this concludes the good news portion of our story. The UAW strike, which began September 15 and only comprised two weeks of its 3Q, has cost the company about $800 million in pre-tax earnings so far, it says, or roughly $200 million a week in lost vehicle production. Even worse: the union celebrated theearnings callby beginning a strike Tuesday, at an SUV plant in Arlington, Texas, one of the company's biggest profit centers.
Unfortunately for GM, its present woes may be speed bumps compared to the giant potholes in its future. Like much of the industry, GM has for years been touting EVs as the future of its business. And GM, like much of the industry, is now realizing that the future may be more far-flung than expected. In itsearnings callTuesday, the company was forced to make an embarrassing public U-turn on its previously announced near-term EV targets:
- In 2021, GM said it would phase out nearly all internal combustion engine vehicles by 2035, and later said it would produce 400,000 EVs over a roughly two-year stretch ending next summer. On Tuesday, the company abandoned that goal.
- That comes after news last week that it was delaying the opening of a Detroit-based EV truck factory by a year. CFO Paul Jacobson said Tuesday the walk-back of the 400,000-EV goal reflects slowing EV sales growth, as high-interest rates turn car buyers away from the pricey green alternatives.
GM also saw a 42% decrease in income from China, where it usually does solid business, due to a surge in China-based EV rivals.
Bye, Robot: As if GM needed any more negative headlines on Tuesday, the state of California's DMV said it's revoking the operating permits of Cruise, the self-driving taxi business in which GM has a majority stake, following a series of high-profile incidents. Now even robot drivers will be hating on the DMV.
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