General Motors profits dive, aims to reopen U.S. plants May 18

NEW YORK, USA – General Motors (GM) said on Wednesday, May 6, it aims to reopen most United States and Canadian manufacturing operations on May 18 as it reported a steep drop in 1st quarter earnings due to the coronavirus.

The company plans to ramp its plants back up gradually, implementing hygiene and monitoring practices from GM factories now building ventilators and protective masks to confront the health crisis. (READ: Auto industry races to make ventilators during virus crisis)

“We’ll start in a very cadenced and thoughtful way of first shift then growing to 2 or 3 shifts, depending on the plant and the demand,” said chief executive Mary Barra.

The US auto giant reported that 1st quarter earnings plunged 86% to $294 million on a 6.2% decline in revenues to $32.7 billion.

Still, GM was the only one of Detroit’s “Big Three” to post a profit during the period, and shares rose sharply. 

Global car sales fell by more than one-fifth during the quarter, with the biggest hit in China, where the coronavirus raged for much of the period.

Car sales also declined in the US, although the impact was mitigated by gains in GM’s full-size pickups.

Analysts expect a bigger decline in US sales in the 2nd quarter. Many GM dealers are open for service and online car sales, but retail operations are skeletal otherwise.

GM estimated the overall hit from the coronavirus in the 1st quarter at $1.4 billion.

Revamped plants

Barra said the company has been working closely with unions and government officials on the plans for the restart.

People entering factories will do a self-assessment questionnaire and have their temperature screened. Other protocols require frequent handwashing, additional cleaning of stations, physical distancing standards, and the wearing of a mask.

“The 3 primary focuses are keeping people who are sick or potentially sick out of the plant, maintaining an environment and then if someone is asymptomatic and is in that plant, a very targeted way to clean and do contact tracing to limit the exposure,” Barra said.

“Over the last several weeks, we’ve been able to demonstrate that’s been quite successful.”

The United Auto Workers praised “great” steps to reconfigure plants and will continue to monitor the situation, said UAW president Rory Gamble.

“We continue to advocate for as much testing as possible at the current time and eventually full testing when available,” Gamble said.

“As for the start date, the companies contractually make that decision and we all knew this day would come. Our UAW focus and role is and will continue to be on health and safety protocols to protect our members.”

Online sales

GM executives said they were focused on ramping up construction of popular pickup and sport-utility vehicles that have continued to sell fairly well, especially away from the coasts of the US in the interior of the country.

Executives acknowledged that they ramped up sales incentives of some of the vehicles during the quarter, but said they were in response to offerings from rivals and were committed to “disciplined” practices. 

The auto giant offered 0% financial for up to 84 months during the quarter, according to Cox Automotive.

In the US, some 800 additional dealers have launched GM’s “Shop. Click. Drive.” service, meaning that around 85% of the company’s dealers now have the program. 

Online sales jumped by 40%, said chief financial officer Dhivya Suryadevara, but during a briefing with reporters she acknowledged the 2nd quarter “will be tough” overall.

Suryadevara said the company was seeing a “stronger recovery” in China, with much more retail traffic in April after the market bottomed out in February at the height of China’s coronavirus outbreak.

With the hit from shuttered production plants and lower car sales, GM has taken steps to retain cash and boost liquidity.

The company, which in April suspended its divided, ended the quarter with $33.4 billion in liquidity.

Shares rose 3% to $21.89. – Rappler.com