General Motors reported much stronger than expected third-quarter earnings and gave an outlook that puts it on the path for record earnings in 2024 – just a year after a costly strike by members of the United Auto Workers union.
The company reported it earned an adjusted profit $3.4 billion in the third quarter, up from $3.2 billion for the year ago period, which was impacted by the first two weeks of the strike that lasted more than six weeks. Adjusted earnings for the first nine months of the year reached $9.9 billion.
Revenue rose more than 10% to $48.8 billion, topping forecasts by nearly $800 million and rising far faster than the 5% increase in the number of vehicles it sold. That means GM is selling cars at higher average prices this year than it was in 2023. Its average transaction price in North America reached nearly $50,000.
GM last year estimated that the strike cost it $1.1 billion. The company had argued during the strike that it couldn’t meet union wage demands and remain competitive with nonunion automakers, but it eventually agreed to give workers an immediate 11% raise and additional raises that will increase wages at least another 14 percentage points over the next four years.
During the strike, the UAW’s slogan on the picket lines was that record profits should result in a record contract. The deal included the largest wage increases ever won by the union at GM.
Nevertheless, GM raised its earnings outlook for the rest of the year Tuesday. Its new guidance suggests that the full-year earnings will now top the record profit of 2022.
The strong results and guidance sent shares of GM (GM) up 2% in premarket trading. Its shares were already up 37% this year through Monday’s close.
GM CFO Paul Jacobson on Monday told reporters that GM cut costs ahead of the strike in anticipation of pay raises for its unionized workers.
“We’ve been able to look at that as cost of doing business,” he said. “No regrets over the UAW contract.”
Jacobson praised the GM team for raising its profit target, noting the company was able to “overcome inflationary pressure.”
If General Motors is having any problems, it’s in its nonunion operations in China, where it lost $137 million in the quarter, compared to the $192 million profit it made there a year earlier.
The number of vehicles sold in China in the quarter fell 37% to 372,000 due to increased competition from Chinese automakers and what GM referred to as “challenging market conditions.”
China had once been GM’s largest market for vehicle sales, but the third quarter sales numbers now represent just over half of its US sales volume.
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