General Motors (GM) reported an 87 percent drop in its net profits for its first quarter. Despite the massive drop, the company still managed to earn a $294 million for the three-month period, a respectable feat given the supply chain disruptions and the closures of its factories due to the coronavirus pandemic.
According to the company, the pandemic had greatly hampered its performance for the period, costing it at least $1.4 billion before taxes. Out of all of the US manufacturers, GM has the largest footprint in China, where the pandemic first hit earlier in the year.
The automaker's international operations reported losses of around $551 million during the first quarter. Fortunately, the losses were offset by the company's North American operations, which reported earnings of around $2.2 billion. GM stated that its earnings in the region were bolstered by its strong pickup sales, particularly after it started offering 84-month terms with zero percent interest rates.
Overall vehicle sales for the quarter had dropped by about 22.4 percent, with the company selling a total of 1.5 million vehicles. GM stated that it will be pushing ahead with its previously announced cost-cutting strategy, which it expects will produce a net savings of around $6 billion this year.
GM CFO, Dhivya Suryadevara, mentioned during the company's conference call on Wednesday that it should be able to fare well in the coming quarters, thanks to its quick action in securing its liquidity early on. However, the executive warned that the company's earnings will likely be the heaviest hit by the pandemic during the second quarter. The company declined to provide an outlook for its performance in the coming quarters given the uncertainties involved.
For its first quarter, GM managed to beat analysts' earnings forecasts of 30 cents per share. The company reported pretax earnings of 62 cents per share during the period. Its overall net profit for the period fell by approximately 86.7 percent from the $2.2 billion it reported over the same period last year. Revenues for the quarter also dropped by around 6.2 percent to $32.7 billion when compared to the $3.9 billion it reported last year.
Following the release of its earnings report, the company's stock prices surged by more than 6 percent during premarket trading. Since the start of the year, GM's stock prices have declined by more than 40 percent.
During the first quarter, GM revealed that it had spent close to $903 million in cash. It reportedly ended the quarter with $33.4 billion in automotive liquidity. Analysts expect that the company could be spending even more money during the second quarter as it had been forced to shut down its plants in the US and Canada back in March. GM is currently preparing to restart its operations, with most of its manufacturing plants scheduled to reopen on May 18.
