GM prioritizes profit over growth, diverging from Tesla.
GM Lifts Full-Year Profit Guidance, Plans to Cut Costs
By Joseph White and Ben Klayman
General Motors (GM) has announced an increase in its full-year profit guidance, citing plans to invest less in new products and cut operating costs by an additional $1 billion through the end of next year. This decision comes after GM reported a 52% rise in net income for the second quarter, reaching $2.6 billion, with a 25% growth in revenue compared to the previous year. The company’s more optimistic outlook reflects stronger demand and higher pricing than anticipated, according to Chief Financial Officer Paul Jacobson.
GM’s strategy to boost profitability includes reducing capital investments from $11 billion to $12 billion this year and targeting an additional $1 billion in overhead, marketing, and other costs. The automaker aims to simplify operations and maintain profitability, as demonstrated by its focus on increasing average transaction prices in North America. However, GM’s profit margins have faced pressure, with pretax margins falling to 8.3% of revenue for the first six months of the year.
GM’s decisions to cut costs and streamline operations come as the automaker faces challenges in China, its second-largest market. While GM reported a profit of $78 million in China, it is earning significantly less than in previous years due to increased competition from Chinese EV brands and Tesla. Despite these challenges, GM remains committed to driving a fundamentally stronger company beyond 2023.
It is important to note that GM’s new profit outlook does not account for the potential costs of a strike by the United Auto Workers union if a new contract is not reached by the September 14 deadline.
(Reporting by Joseph White and Ben Klayman in DetroitEditing by Matthew Lewis and Louise Heavens)
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