By Joseph White and Paul Lienert
DETROIT – (Reuters) – General Motors Co on Tuesday lifted its full-year profit and cash flow forecasts, citing stronger-than-expected demand and higher prices, even as pre-tax profits for the first quarter fell.
The No. 1 U.S. automaker said it expects full-year pre-tax profits in a range between $11 billion and $13 billion, up $500 million from a prior forecast. Automotive cash flow for the year should land in a range between $5.5 billion and $7.5 billion, the company said. That range is also increased by $500 million at the upper and lower ends.
“To the extent we see demand hold up we could probably beat the mid-point of where we are,” Chief Financial Officer Paul Jacobson said during a conference call.
For the first quarter of 2023, GM reported adjusted pre-tax profits of $3.8 billion, or $2.21 a share, on revenues of $40 billion, down from pre-tax profits of $4 billion on revenues of $36 billion a year ago.
The first-quarter result beat the company’s internal forecasts, Jacobson said. Savings from a drive to cut $2 billion from fixed costs by the end of 2024 “are flowing to the bottom line faster than we originally anticipated,” he said.
About 5,000 employees have accepted buyout packages to leave the company, GM said this month.
Consumers willing to pay a rich price for a new vehicle gave GM a significant boost. Higher prices added nearly $1,800 a vehicle to GM’s North American pre-tax profit, the company reported. The gain from higher prices more than offset increased costs, GM reported. Price hikes in GM’s international operations added $2,127 per vehicle in pre-tax profit.
Wall Street sees Tesla’s recent price cuts as a threat to rival automakers’ margins. Jacobson said GM is sticking with its pricing strategy.
“We feel really good about where we are priced right now, and consumers seem to be demanding our products,” he said.
However, pre-tax income from GM’s China joint venture operations plunged by half to about $100 million in the quarter as unit sales fell by 23%. GM once had a leading position in the world’s largest auto market. Now, GM brands such as Buick and Chevrolet are under intense pressure in China as consumers shift to electric vehicles offered by domestic Chinese auto brands.
Jacobson said GM is counting on launches of its new generation electric vehicles to help rebuild sales and profits in China.
“We’re going to continue to remain agile. We feel good about the long term and getting the business back to where it was,” Jacobson said.
GM reaffirmed a goal of building 400,000 EVs in North America from 2022 through the first half of 2024. The company has been slow to ramp up in production of its newest EVs, with just 968 Cadillac Lyriq EVs delivered in the first quarter.
(Reporting by Paul Lienert in Detroit; Editing by David Gregorio)
