Trump tariffs take US$1-billion bite out of GM earnings, shares fall

[BENGALURU] General Motors’ (GM) second-quarter earnings took a US$1.1-billion hit from tariffs, but the automaker still beat analyst expectations for the period on Tuesday (Jul 22), supported by strong sales of its core petrol trucks and SUVs.

The largest US automaker by sales said it expects the tariff impact to worsen in the third quarter and stuck to a previous estimate that trade headwinds threaten to hit the bottom line by US$4 billion to US$5 billion this year. GM said it could take steps to mitigate at least 30 per cent of that impact.

Shares fell 8 per cent.

The automaker’s revenue in the quarter ended Jun 30 fell nearly 2 per cent to about US$47 billion from a year ago. Its quarterly adjusted earnings per share fell to US$2.53 compared with US$3.06 a year earlier. Analysts on average expected adjusted profit of US$2.44 per share, according to data compiled by LSEG. Its adjusted earnings before interest and taxes fell 32 per cent to US$3 billion.

GM was among corporations that revised annual guidance due to the impact from US President Donald Trump’s tariffs, lowering it to an annual adjusted core profit of between US$10 billion and US$12.5 billion. The company on Tuesday stood by that forecast.

CFRA Research analyst Garrett Nelson wrote in a Tuesday morning note that one of the reasons shares dropped was because investors were disappointed the automaker did not raise guidance.

Beyond tariffs, GM’s underlying business in the quarter was solid. Sales in the US market, its main source of profit, rose 7 per cent, while the company continued to command strong pricing on its pickup trucks and SUVs. GM swung back to a small profit in China, after losing money there a year earlier.

Analysts said GM may need to cut investment in future projects or find other ways to trim spending to offset the effect of tariffs. The automaker is so far keeping pricing consistent and absorbing added tariff costs rather than passing them on to customers.

Jeep-maker Stellantis on Monday warned that tariffs would significantly affect results in the second half of 2025, and said tariffs cost it about 300 million euros in the first half of the year. Shares of Ford Motor fell about 1 per cent on Tuesday, and US-traded shares of Stellantis edged up less than 1 per cent.

GM took several steps in recent months to bolster its combustion-engine operations through increased investment in its US factory base, calling into question its goal of ending the production of petrol-powered cars and trucks by 2035.

“Despite slower electric vehicle (EV) industry growth, we believe the long-term future is profitable EV production, and this continues to be our north star,” GM CEO Mary Barra told analysts on Tuesday.

GM announced in June that it would invest US$4 billion at three US facilities in Michigan, Kansas, and Tennessee, including a plan to move production of the Cadillac Escalade and increase output of its two big pickup trucks. It added production of its previously Mexico-produced Chevy Blazer to the Tennessee plant.

The automaker imports about half of the vehicles it sells in the US, mainly from Mexico and South Korea. Crosstown rival Ford produces about 80 per cent of its US-sold vehicles domestically. Ford is expected to report second-quarter results next week

Car companies are increasingly shifting their focus to bolstering the core lineup of petrol trucks and SUVs, as the growth rate of EV sales has slowed. Demand for battery-powered models already has slowed after rapid growth earlier this decade.

The trend is intensified by the pending disappearance of government support for the battery-powered models. Sweeping tax and budget legislation approved by Congress will eliminate US$7,500 tax credits for buying or leasing new EVs and a US$4,000 used-EV credit at the end of September. Trump also signed tax and budget legislation that eliminates fines for failures to meet fuel economy rules, a move that makes it easier to build more petrol-powered vehicles. REUTERS