Even though General Motors was able to reopen its United States factories for the last half of the second quarter, the company still lost $806m from April through June.
The Detroit automaker closed its plants on March 18 and they remained closed for two months due to the coronavirus. Production did not resume fast enough to stem the losses.
Like other automakers, GM counts revenue when vehicles are shipped from factories, so it had little money coming in for about seven weeks in April and May.
The company reported a loss of 50 cents per share excluding one-time items. That was better than Wall Street expected, with analysts polled by FactSet predicting a $1.77 per-share loss.
Revenue was cut in half to $16.78bn, but that also topped expectations.
There's a ton of uncertainty out there.
GM burned through more than $9bn during the quarter, including nearly $8bn from operations and $1.1bn in capital spending. It lost money before taxes in all of its business units save for its financial arm. In its traditionally profitable North America wing, GM lost $100m.
The company raised borrowing on its revolving credit line to $16bn to get through the crisis, pushing automotive debt to more than $32bn. It was $13bn a year ago.
Chief Financial Officer Dhivya Suryadevara said that if annual US sales continue at a rate of 14 million and production is not disrupted, GM should generate $7bn to $9bn in cash during the second half of the year, offsetting a large part of the first-half cash burn. The company should be able to repay its revolving credit line by year’s end, she said.
She also said that if the recovery continues from the pandemic, GM expects pretax earnings of $4bn to $5bn in the second half of the year.
“There’s a ton of uncertainty out there,” she said.
Sales in the US, GM’s most lucrative market, fell 34 percent for the quarter, even though executives said there is pent-up demand for vehicles, especially pickup trucks. GM has put many of its truck plants on three shifts as it tries to make up for lost production.
Suryadevara said the company nearly reached break-even pretax earnings in North America in a challenging quarter.
“These results illustrate the resiliency and earnings power of the business as we make the critical investments necessary for our future,” Suryadevara said in a prepared statement.
GM is seeing signs of improvement, and some areas, such as pickup trucks, have been constrained by low inventory levels as plants came back on line. “The company is working all avenues to increase US dealer stocks and has restarted all US truck and full-size SUV plants to three shifts, and nearly all other plants to pre-pandemic shift levels,” GM said.
US sales tumbled 35 percent in April, but that improved to a decline of around 20 percent year over year in May and June, the company said.
The company reported strong sales of pickup trucks and new full-size SUVs such as the Chevrolet Tahoe and GMC Yukon. “They’re flying off the dealer lots,” Suryadevara said.
CEO Mary Barra said the company would add 200 workers at its pickup truck plant in Fort Wayne, Indiana, to meet demand. Workers likely will be transferred from other GM factories.
GM said it would stop deferring white-collar salaries on August 1 because it is performing better than expected. The company deferred 20 percent of salaried workers’ pay in April and will repay the amount with interest.
The whole auto industry was expected to struggle this quarter as the pandemic cut into sales. Electric vehicle company Tesla may wind up the lone exception because it managed to post a $104m profit. But Japan’s struggling Nissan reported a $2.7bn loss (285.6 billion yen) for the period.
GM’s shares fell 3.5 percent to $25.43 in Wednesday morning trading.