GM profit shrinks on billion-dollar tariff hit
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The company manufactures cars in Canada, Mexico and South Korea that it exports to the United States. Those vehicles have been subject to tariffs of up to 25%. Tariffs will cost the company as much as $5 billion for the full year, although GM said it hopes to offset about a third of that amount by cutting costs and moving some manufacturing to the United States.
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GM CEO Mary Barra said in a letter to shareholders that the company is investing $4 billion to increase production in the United States of pickups and sport utility vehicles that would be less susceptible to tariffs.
'We are positioning the business for a profitable, long-term future as we adapt to new trade and tax policies, and a rapidly evolving tech landscape,' Barra said.
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Sales of electric vehicles more than doubled, GM said, because of new models like a battery-powered version of the Chevrolet Equinox, an SUV that has a starting price of around $35,000. GM said it has 16% of the electric vehicle market in the United States, second only to Tesla.
At the same time, GM is taking advantage of Republican legislation that gutted enforcement of clean air and fuel economy standards. The company said it would invest $900 million to manufacture a new V-8 engine in Tonawanda, New York, north of Buffalo. The gasoline-powered engine will be used in large pickups and SUVs.
'Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production,' Barra said. But she added that vehicles with internal combustion engines now have 'a longer runway.'
In a hopeful sign for GM, the company said it increased sales in China during quarter to $6.1 billion from $4.7 billion a year ago. Most Western automakers have struggled to compete in China with domestic companies like BYD, which are selling high-quality cars at low prices and have taken the lead in electric vehicle technology.
GM sells Cadillac, Buick and Chevrolet vehicles in China through a joint venture with SAIC Motor. Half the cars sold by the partnership during the quarter were electric vehicles or hybrids, GM said.
GM shares were down about 7% Tuesday morning.
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