Despite an increase in revenue and per-vehicle transaction prices, General Motors said on Tuesday that adjusted pre-tax profit and margins in its important North American market decreased from the first quarter. The company is also having difficulty producing more electrified vehicles.

In midday trade, shares were down 4.4% at $37.58.

The automaker increased its full-year profit forecast while announcing intentions to spend less in new products and reduce operating costs by an extra $1 billion through the end of 2019.

In a conference call with investors, Chief Executive Mary Barra announced that GM had abandoned plans to discontinue the ageing Chevrolet Bolt, its least expensive EV, at the end of this year. Instead, the business plans to release an upgraded Bolt with a more modern Ultium battery pack, albeit it made no mention of the price, release date, or manufacturing facility.

“A new Bolt should cost the same or less to produce than the outgoing model” if it shifts to a dedicated EV platform and next-generation batteries, said Sam Fiorani, head of global forecasting at AutoForecast Solutions.

Barra claimed that “our automation equipment supplier is having delivery issues,” which has affected battery manufacturing at the Ultium joint venture facility in Lordstown, Ohio. Barra predicted that a solution will be found by year’s end. According to her, GM is now manually assembling battery modules on assembly lines.

GM reported that despite an increase in revenue and per-vehicle transaction prices, adjusted pre-tax profit and margins in its important North American market declined from the first quarter. A $792 million charge for new contracts with EV supplier partners LG Electronics and LG Energy Solution was included in the second quarter’s financial results.

GM reported that net income for the second quarter increased by roughly 52% year over year to $2.6 billion, while revenue increased by 25% from the same period in 2022 when manufacturing was constrained by a scarcity of semiconductors.

From an earlier prediction of $8.4 billion to $9.9 billion, GM said it now anticipates full-year net income of between $9.3 billion and $10.7 billion. GM expects net income of $7.15 to $8.15 per share for the entire year, up from a range of $6.35 to $7.35.

The possible expenses of a strike by the United Auto Workers union should it fail to sign a new deal with GM by the deadline of September 14 are not taken into account in the updated projection.

The UAW emphasised GM’s strong sales and profits, which were primarily generated from union-made vehicles, and issued a statement urging GM to make additional concessions in the ongoing contract discussions.

“Auto workers and our communities have yet to be made whole for the sacrifices we’ve made since the Great Recession,” UAW President Shawn Fain said.

Following six months of higher demand and richer pricing than anticipated earlier this year, GM’s outlook has become more optimistic, according to Chief Financial Officer Paul Jacobson.

However, the move to reduce operating expenses and investments in new products comes at a time when the automaker’s profit margins are under pressure. For the first half of the year, GM’s pre-tax profit margin decreased from 8.9% of revenue to 8.3%.

GM had originally planned to spend between $11 and $13 billion this year, but has since reduced that estimate to between $11 and $12 billion.

“There’s a lot of focus on winning with simplicity,” Jacobson said.

According to Barra, GM can reduce capital expenditures by streamlining its product range and limiting the amount of available colour and feature combinations. According to Barra, GM wants to reduce the number of feature and colour trim possibilities in half.

According to Jacobson, GM increased average transaction costs in North America by $1,600 to around $52,000 in the most recent quarter, which contrasts with Tesla CEO Elon Musk’s approach of lowering prices to boost demand.

“We’re focused on profitability. Our recent results demonstrate that we’re not sacrificing margin for volume,” he said.

In a letter to investors, Barra stated that the automaker plans to produce “roughly 100,000 EVs in the second half of this year and we’ll grow from there.” About 50,000 EVs were produced by GM in the first half, the majority of which were the older Bolt model, which starts at $27,495.

In its earnings report, General Motors reaffirmed its earlier goal of producing 400,000 electric vehicles between 2022 and the first half of 2024. The company also forecast EV sales of $50 billion in 2025, with pre-tax profits in the low to mid single digits.

Even though GM plans to raise capacity to 1 million units by 2025, a gradual ramp-up of its battery plants in Ohio, Tennessee, and Michigan may prevent the automaker from producing more than 600,000 yearly electric vehicles by the middle of the decade.

Garrett Nelson, an analyst with CFRA, wrote to investors and stated that he is still “cautious due to the near-term earnings drag from GM’s EV transition and its ability to execute an aggressive production ramp, as well as ultimate demand for its EV models.”

(Adapted from ThePrint.in)