GM is hopeful despite 2nd Quarter Decline
The automotive industry has encountered economic challenges in the past, and this year, it took another hard hit. The outbreak of a virus that made its way from China to the United States not only affected every family but millions of automobile factories and other businesses as well. General Motors is a leader in the global automobile market, but the company saw substantial decline in both income and revenue in its second quarter this year. GM employs both salary workers, as well as those who earn hourly wages. Despite losing weeks of production, the company says it nearly broke even in earning before interest and taxes in the second quarter throughout North America.
When the virus outbreak made its way across the country, numerous state governments began mandating shut downs of non-essential factories and other businesses. The shut downs sparked significant drops inventory, shipments and sales. GM suffered an $800 million loss on a revenue of more than $16 billion. Company CEO Mary Barra says GM is resilient and always has its stakeholders best interests in mind. Although the pandemic prompted more than a 50% decline in revenue and more than 130% decline in income compared to the second quarter of 2019, things could be a lot worse and are, in fact, looking bright for the future.Read More »
This is not GM’s first go around with economic crisis
Like Ford and many other world leading auto manufacturing companies, GM suffered severe financial distress when the economy crashed in 2008. At the time, GM required government assistance and a payment deferral program in order to keep its doors open. Since that time, all loans, as well as net income to shareholders have been paid back in full.
Perhaps, the resilience the company showed in surviving the 2008 economic crisis has been a cause for hope that it will once again rise above the setbacks it has endured because of the 2020 pandemic.
Ford and GM have some key differences between them
General Motors is a larger company than Ford. The latter reportedly resumed normal shift operations in U.S. plants sooner than expected during the pandemic. In addition to being the smaller of the two manufacturing icons, Ford also produces less brands than General Motors. In its adjusted pretax losses during the shut downs, Ford says it did $3 billion better than expected.
Despite Ford’s impressive performance in a time of global crisis, GM continues to be the largest automotive market shareholder in the United States. In 2019, the company was responsible for 17% of total sales within the industry.
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GM is looking to the future
GM’s CFO says the company is confident it will rise above the challenges of the second quarter and is currently planning strategic investments that will be crucial toward future success. The U.S. remains GM’s largest profit region although dealer inventory was extremely low in recent months.
During the coronavirus pandemic, GM sales plummeted 24%. GM says it was well-prepared for the downturn because its primary focus in recent years has been budget trimming and cost effective initiatives. Moving forward, the company plans to focus on tech savvy vehicles and crossover programs. As of late July, U.S. GM dealer stock had already increased 9%, leaving the company confident and hopeful that things are looking up. GM spokespeople say the company is known for its innovative ideas and ability to rebound when times get tough. Overall, the U.S. automotive industry performed better than expected in the aftermath of the COVID-19 crisis. It is now focused on rebuilding and holding its own as a global leader in the auto manufacturing business.
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