Yahoo Autos Trump Tariffs Dim GM’s Outlook for the Year
Despite higher vehicle sales in the United States and China, General Motors posted flat revenues of $36.8 million and its net profit dropped 3 percent to $2.4 billion in the second quarter. In announcing the results, the company said it was hit by Trump administration tariffs and unfavorable exchange rates in South America. GM also lowered its earnings outlook for the back half of the year because of the duties.
“Our operating performance was impacted by significant headwinds from commodity costs and currency devaluations in South America,” company CFO Chuck Stevens said in a release. “For the rest of the year we will focus on flawlessly executing our full-size truck launches and continue managing the business with discipline in a more challenging environment.”
Those truck launches include the 2019 Chevrolet Silverado and the 2019 GMC Sierra, with deliveries of the crew-cab versions expected to begin early next month. In the second quarter, the automaker delivered 758,000 vehicles in the United States, a rise of 4.6 percent. Sales growth was led by a 21 percent increase in Chevrolet and GMC pickup sales and 22 percent growth for those brands’ SUVs. Deliveries in China grew 4 percent to 858,000 vehicles.
But tariffs remain an obstacle for the automaker. Tariffs of 25 percent on steel and 10 percent on aluminum took effect last month after the U.S. Department of Commerce completed a Section 232 investigation. Such an investigation, heretofore unused in establishing a new tariff for more than 30 years, is also being undertaken for automobiles and related parts.
In a conference call with investors, Stevens said that, with at least a three-month lag time in material price increases, the company foresees getting hit with the “full effect” of the steel and aluminum duties in the second half of the year. Automotive News reported that GM sources “more than 90 percent of its steel and most of its aluminum domestically,” but the duties on those commodities represent the bulk of the projected $1 billion impact on the automaker’s added operational costs this year; it had previously forecast annual costs of about $500 million.
President Donald Trump has in the past threatened to apply tariffs of up to 25 percent on imported passenger vehicles, citing a trade deficit and an uneven playing field. Separately, the administration has already put 25 percent tariffs on automobiles and hundreds of other industrial goods coming into the U.S. from China, arguing the move is to combat the theft of intellectual property.
GM CEO Mary Barra said in the Q2 conference call that the China tariffs already enforced by the Trump administration have not had a major impact on the company’s operations, as it builds most of the cars it sells in China within the country. GM imports the Buick Envision to the U.S. from China, although it sells far fewer units stateside than it does in China, Barra noted.
In the conference call, some investors asked GM execs how the company is handling the Section 232 investigation into car and truck imports and ongoing NAFTA negotiations, but Barra declined to go into details, noting there were too many possible outcomes amid the uncertainty. She said the company continues to work with trade representatives, providing input and looking to ensure any decision made by the Trump administration does not have “unintended consequences.“
Leading up to a public hearing for the investigation, GM submitted a public comment last month that warned about what it apparently sees as such unintended consequences: “If import tariffs on automobiles are not tailored to specifically advance the objectives of the economic and national security goals of the United States, increased import tariffs could lead to a smaller GM, a reduced presence at home and abroad for this iconic American company, and risk less-not more-U.S. jobs.”
('You Might Also Like',)
