GM reports strong sales but says it’s prepared for a possible recession
“We have also modeled many downside scenarios and stand ready to take deliberate action when and if needed,” she said.
GM does not yet see signs of a recession, given strong demand for new vehicles, Chief Financial Officer Paul Jacobson said in response to questions from the media.
“We don’t see anything that indicates short-term issues, but we have to be aware of the noise that’s out there and what other people are seeing,” he said. “We’re going to be very nimble and very nimble and respond to that.”
Jacobson would not offer an opinion on the chances of a recession over the next year, saying “I don’t like getting into probabilities to predict. Our job is to react, plan and prepare.”
He said all of his customer data, including credit reports from GM Financial, show a lot of continued strength among American consumers and pent-up demand to buy vehicles.
“But we are monitoring and we will make sure to adjust the business according to our needs,” he added.
GM tried to reassure investors, saying it expects to hit its annual profit target, despite economic worries.
“We feel like we’re in a really good position,” Jacobson said. “We believe we are on track to deliver the year we [forecast] at the beginning of the year.”
Profit down despite increase in turnover
But revenue rose $1.6 billion to $35.8 billion, easily beating forecasts that predicted lower revenue. The number of vehicles sold worldwide by GM dealers and distributors remained about the same as first-quarter sales, but fell 19% to 1.4 million from a year ago.
Limited vehicle supply and strong demand, particularly in North America, drove prices up. The strong pricing environment added $1.8 billion to the company’s results in the quarter.
Part of the decline in vehicles sold was due to the lockdown in China, and part was due to the continued shortage of computer chips and other necessary supplies. The company had 95,000 vehicles it built during the quarter but was unable to complete due to a lack of parts. About 75% of them are full-size pickup trucks and SUVs, GM’s most profitable vehicles. Jacobson said the company plans to complete these vehicles and sell them in the second half of the year, and has already made progress so far this month.
“We came away thinking we were going to produce a lot more vehicles in the quarter,” he said. “Almost all of these vehicles will return in the second half.”
GM lost $87 million in China, the first loss there since early 2020 when the pandemic began.