By Jozef Wit
DETROIT (Reuters) – U.S. automakers General Motors and Ford face a common challenge when they report first-quarter results next week: explaining to investors where profit growth will come from in the coming months if electric vehicle growth slows .
The slowdown in global demand for electric vehicles, increasing competition from Chinese automakers and high U.S. borrowing costs have forced U.S. automakers to delay investments and cut costs over the past 12 months. With the Chinese economy slowing and US inflation soaring, a boost to macroeconomic growth seems far away.
That’s causing companies like GM and Ford to focus on selling their flagship gasoline vehicles, where they make the majority of their profits. GM and Ford will report their results on Tuesday and Wednesday, respectively.
GM CEO Mary Barra will get a boost from strong demand for automaker Chevrolet and GMC’s highly profitable pickup trucks and SUVs. Barclays earlier this month raised its price target on GM shares by 10% to $55, citing robust sales of GM’s truck and SUV lineup.
GM Chief Financial Officer Paul Jacobson said the year had started well and the company was positive about the demand trend, while Ford CFO John Lawler, in reaffirming full-year earnings guidance, said the car prices held up better than in previous years. expected.
Legacy U.S. automakers, which rely heavily on sales of large trucks and SUVs, have been bogged down by higher costs associated with electrifying their vehicle offerings and bumpy demand for battery-electric vehicles.
Evercore ISI analyst Chris McNally said in a research note that momentum has shifted for previous winners like Tesla as EV sales growth slows. Investors have instead refocused on GM, Stellantis, Toyota and others that rely less on electric vehicles, he added.
The high ratio of gasoline trucks to electric cars in GM’s North American sales mix will help offset an expected loss in the automaker’s business in China. GM said U.S. vehicle sales fell 1.5% in the first quarter due to lower deliveries to commercial customers, but retail sales rose 6%.
Barra has not yet outlined specific plans for restructuring GM’s Chinese operations. Last year, GM delivered 2.1 million vehicles in China, down nearly half from the 4.04 million it reported in 2017.
Meanwhile, investors want an update on GM’s struggling Cruise robotaxi unit.
Barra did not say how GM will finance the company’s relaunch and rebuild after a serious accident forced the company to halt driverless operations. GM has said it will cut spending at Cruise by $1 billion this year. The unit has lost more than $8 billion since GM took over in 2016.
Cruise said on April 9 that it will put some vehicles with human drivers back on the road in Phoenix, Arizona.
Shares of the Detroit automaker rose in January when it said it would return more money to shareholders.
Ford also draws power from its internal combustion truck business and from its Ford Pro commercial vehicle business. The automaker reaffirmed its forecast of core profit of $10 billion to $12 billion this year.
The automaker said earlier this month it would delay two major electric vehicle programs. CFO Lawler told an investor conference that future EV investments will not progress unless they can “stand alone” and generate profits.
(Reporting by Joe White in Detroit; additional reporting by Ben Klayman in Detroit; Editing by Matthew Lewis)
