Plant closings send GM to 2Q loss, but signs of improvement

DETROIT (AP) - Even though General Motors was able to reopen its U.S. factories for the last half of the second quarter, the company still lost $806 million in the three months between April and June.

The Detroit automaker had to close its plants from March 18 to May 18 due to the coronavirus, and production didn’t resume fast enough to stem the losses.

Like other automakers, GM counts revenue when vehicles are shipped from factories, so it had little money coming in for about seven weeks in April and May.

The company reported a loss of 50 cents per share excluding one-time items. That was better than Wall Street expected, with analysts polled by FactSet predicting a $1.77 per-share loss.

Revenue was cut in half to $16.78 billion, and that also beat estimates. The company made $2.38 billion in the same quarter a year ago.

GM burned through more than $9 billion during the quarter including nearly $8 billion from operations and $1.1 billion in capital spending. It lost money before taxes in all of its business units but its financial arm. In normally profitable North America, GM lost $100 million.

The company raised borrowing on its revolving credit line to $16 billion to get through the pandemic crisis, pushing automotive debt to over $32 billion. It was $13 billion a year ago.

Chief Financial Officer Dhivya Suryadevara said that if annual U.S. sales continue at a rate of 14 million and production isn’t disrupted, GM should generate $7 billion to $9 billion in cash during the second half of the year, offsetting a large part of the first-half cash burn. The company should be able to repay its revolving credit line by year’s end, she said.

Sales in the U.S., GM’s most lucrative market, fell 34% for the quarter, even though executives said there is pent-up demand for vehicles, especially pickup trucks. GM has put many of its truck plants on three shifts as it tries to make up for lost production.

Suryadevara said the company nearly reached break-even pretax earnings in North America in a challenging quarter.

“These results illustrate the resiliency and earnings power of the business as we make the critical investments necessary for our future,” Suryadevara said in a prepared statement.

GM said sales are showing signs of improvement, and in some areas, such as pickup trucks, have been constrained by low inventory levels as plants came back on line. “The company is working all avenues to increase U.S. dealer stocks and has restarted all U.S. truck and full-size SUV plants to three shifts, and nearly all other plants to pre-pandemic shift levels,” GM said.

U.S. sales tumbled 35% in April, but that improved to a decline of around 20% year over year in May and June, the company said.

The company reported strong sales of pickup trucks and new full-size SUVs such as the Chevrolet Tahoe and GMC Yukon. “They’re flying off the dealer lots,” Suryadevara said.

GM said it would stop deferring white-collar salaries on Aug. 1 because it is performing better than expected. The company deferred 20% of salaried workers’ pay in April and will repay the amount with interest.

The whole auto industry was expected to struggle this quarter as the pandemic cut into sales. Electric vehicle company Tesla may wind up the lone exception because it managed to post a $104 million profit. But Japan’s struggling Nissan reported a $2.7 billion loss (285.6 billion yen) for the period.

GM’s shares rose just over 1% to 26.73 after the opening bell.