“We have also modeled many downturn scenarios and we are prepared to take deliberate action when and if necessary,” she said.
GM is not yet seeing any signs of a recession, given the strong demand for new vehicles, said CFO Paul Jacobson in response to questions from media.
“We’re not seeing anything that indicates any near term issues, but we have to be conscious of the noise that is out there and what other people are seeing,” he said. “We’re going to be very agile and very nimble and respond to that.”
Jacobson wouldn’t give an opinion on the chances of a recession during the course of the next year, saying “I don’t like to get into the odds of predicting. Our job is to respond and plan and prepare.”
He said that all data on its customers, including credit reports from GM Financial, show a lot of continued strength among US consumers and pent-up demand to buy vehicles.
“But we’re watching and we’ll make sure we adjust the business as we need too,” he added.
GM tried to assure investors, saying it expects to hit its full-year earnings target, despite the economic worries.
“We feel like we’re in really good position,” Jacobson said. “We feel like we’re on track to deliver the year we [forecast] at the beginning of the year.”
Drop in profit despite increased revenue
But revenue was up $1.6 billion, to $35.8 billion, easily topping forecasts that called for a drop in revenue. The number of vehicles sold worldwide by GM’s dealers and distributors remained roughly on par with first quarter sales but were down 19% to 1.4 million compared to a year ago.
The limited supply of vehicles and strong demand, especially in North America, drove up prices. The strong pricing environment added $1.8 billion to the company’s results during the quarter.
Part of the drop in vehicles sold was because of the lockdown in China, and part of it was due to the continued shortage of computer chips and other needed supplies. The company had 95,000 vehicles that it built in the quarter but couldn’t complete due to a lack of parts. About 75% of those are full-size pickups and SUVs, GM’s most profitable vehicles. Jacobson said the company expects to complete those vehicles and sell them during the second half of the year, and was already making progress so far this month.
“We went in thinking we were going to be producing a lot more vehicles in the quarter,” he said. “Substantially all those vehicles will come back in the 2nd half of the year.”
GM lost $87 million in China, it’s first loss there since early 2020 at the start of the pandemic.