GM stays profitable in Q1 despite shutdowns; targets May 18 to restart

DETROIT—General Motors' first quarter net income plunged 87 percent, but earnings in North America rose even as the coronavirus pandemic drove production to a standstill.

The $294 million profit made GM the only one of the Detroit 3 to avoid a first quarter loss after the companies closed all of their U.S. plants in mid-March. GM said the crisis reduced its adjusted earnings by $1.4 billion before interest and taxes.

Fiat Chrysler Automobiles posted a first quarter net loss of $1.8 billion, and Ford Motor Co. lost $2 billion. Ford warned that its operating loss would exceed $5 billion in the second quarter.

GM said it aims to reopen most plants in the U.S. and Canada on May 18, mirroring a plan announced Tuesday by FCA. Despite the plants being closed for the last two weeks of the quarter, strong sales of pickups and big SUVs pushed North American profits to $2.2 billion, a 16 percent increase from the first quarter of 2019.

Global revenue fell 6.2 percent to $32.7 billion, and the company's profit margin decreased 2.8 points to 3.8 percent. Adjusted earnings before interest and taxes decreased 46 percent to $1.25 billion.

GM shares surged 7 percent to $22.75 in morning trading in New York.

CFO Dhivya Suryadevara said GM would be hit harder in the second quarter, but she declined to provide any projections for that period or the full year.

"We are not providing formal guidance at this time," she said on a conference call. "It's too early to tell until the economy opens up."

In a statement, GM said it intends to resume "the majority of manufacturing operations on May 18 in the U.S. and Canada under extensive safety measures." That plan, which is being developed in coordination with the UAW and government officials, would mean the company missed out on about two months' worth of production.

UAW President Rory Gamble, in a statement May 5, did not object to GM's May 18 restart date after calling earlier plans to reopen plants as of May 4 "too risky."

"The companies contractually make that decision and we all knew this day would come at some point," the statement said, echoing what the union said May 5 about FCA's restart plans. "Our UAW focus and role is and will continue to be, on health and safety protocols to protect our members."

GM's international regions lost $551 million in the first quarter vs. a gain of $31 million a year earlier, and China equity income fell $543 million, primarily because of coronavirus shutdowns in that country.

Earnings from GM Financial decreased 36 percent to $230 million.

'Continue as planned'

Suryadevara said the pandemic has resulted in minor product changes, such as deferred freshenings, but has not interrupted GM's work on electric and autonomous vehicles.

In March, GM invested $20 billion in EV and AV development, and the auto maker has said it plans to launch 20 EVs globally by 2023.

"Our key product programs … whether it's our full-size SUV franchise or EV and AV… they will continue as planned," she said.

GM is in a unique position in its product cycle, she added. The auto maker had already launched all-new architectures for a variety of platforms before the pandemic.

"If you look at the product cadence that we are on, we happen to be in the sweet spot where we have made a lot of the investment already from an ICE perspective," Suryadevara said.

When plants reopen, GM will prioritize profitable products that dealers are running low on, such as pickups, she said.

"Obviously truck is our strong suit, and that's something we are we're going to capitalize on," she said.

Visits to GM's Shop-Click-Drive online car-shopping tool have increased 40 percent during the pandemic, she said. About 3,500 GM dealerships have access to the tool, an increase of about 800 since the crisis started and many dealers converted to virtual sales.

GM is on track with the restructuring plan it launched in 2018, Suryadevara said. It expects to contribute $6 billion in cash savings by the end of this year, and in the first quarter, GM put another $300 million toward that goal, she said.

Liquidity measures

GM ended the quarter with $33.4 billion in automotive liquidity, including $16 billion recently drawn from revolving credit lines. The auto maker bolstered its cash reserves by reducing paychecks for all salaried employees globally by 20 percent, promising to make up for the lost income within a year.

It also extended $3.6 billion under its three-year revolving credit agreement, and GM and GM Financial renewed their 364-day $2 billion revolver.

The auto maker has been stoking demand during the crisis with no-interest, 84-month loans and deferred payments of up to 120 days to customers in top credit tiers.

GM also created a health and safety manual to instruct team leaders on the company's new safety protocol.

"In these uncertain times, we must focus on controlling what we can, and we will continue to take the appropriate actions. As the COVID-19 situation continues to evolve, we are ready to adapt and make any changes to policy in accordance with relevant health and safety protocols issued by authorities," CEO Mary Barra and Jim Glynn, vice president of global workplace safety, said in the 48-page guide.

GM's manual outlines requirements for physical distancing, wearing face masks and safety glasses, and participating in health questionnaires and temperature screenings.

GM's housekeeping team will clean high-traffic areas three to four times per shift, as well as between shifts. Doors will be propped open when possible to increase airflow and eliminate the need for workers to touch them.