General Motors was able to turn a profit in the first three months of the year during the Covid-19 pandemic, and America’s largest automaker intends to reopen its US and Canadian plants on May 18.
The company reported net income of $294 million, a big drop from the $2.2 billion it earned a year ago, but better than the first-quarter losses reported at Ford (F) and Fiat Chrysler (FCAU). Revenue fell 6% to $32.7 billion.
Shares of GM (GM) jumped in early trading on the report.
GM took a bigger hit in its international operations, particularly in China, which is its largest market for car sales. The company suspended Chinese operations for a much longer time than it shut down North American production: GM extending its new year holiday shutdown until mid-February.
US factories were shut beginning the last two weeks of March. So GM reported operating income of $2.2 billion in North America, while losing $551 million in overseas operations.
GM said it is working with the unions and government health officials on safety measures that will be needed to reopen its US and Canadian plants later this month and operate them safely. Although auto plants have reopened in Asia and Europe, they have, for the most part, remained closed in North America.
“These procedures meet or exceed CDC and WHO guidelines, and are designed to keep people safe when they arrive, while they work and as they leave the facility,” said the company in its statement.
Rival Fiat Chrysler (FCAU) said Tuesday that it expects that most of its US plants to restart the week of May 18. But that depends on continuing talks with the United Auto Workers union and the governors of the various states where the plants are located, “particularly Gov. [Gretchen] Whitmer of Michigan,” said Fiat Chrysler (FCAU) CEO Michael Manley. Ford (F) has yet to give a target date to reopen its plants.
The UAW said it has been working with the three unionized automakers about safety procedures at the reopened plants.
“Our volunteer members and the companies have done great work to reconfigure plants to achieve this safety goal,” said UAW President Rory Gamble. “We continue to advocate for as much testing as possible at the current time and eventually full-testing when available. “
One major problem for the automakers is uncertainty about how much demand there will be for new car purchases when the plants reopen. Sales across the industry were believed to be down more than 50% in April, according to estimates from Cox Automotive, which operates sites such as Kelley Blue Book and AutoTrader.
GM did see “resilience” for some of its most profitable vehicles, including pickup trucks, in April, according to CFO Dhivya Suryadevara, who said truck sales in some parts of the country had been a “bright spot” in the most recent month.
But she said GM could make no forecast on either sales or profitability in the second quarter, even if it is able to restart plants as planned.
“It’s too early to tell until the economy starts to open up,” she said on a call with journalists Wednesday. “You can expect the second quarter will be the hardest hit. I can’t predict what consumer demand is going to be as we open up.”
Suryadevara said that GM is still in discussions about when it will open plants in Mexico, where it has more presence than other US automakers.
US auto sales had started to slow even before the Covid-19 crisis hit. The shutdowns and stay-at-home orders have caused a record number of people to lose their jobs, creating financial strain on households and sapping incentive for people to buy a new car to get to work.
Even if some of those workers return to work, those who have missed payments and had their credit damaged during the crisis might have trouble qualifying for the financing being offered to buyers by GM and other automakers.
And millions more people are likely to continue to work from home even as the economy starts to reopen, reducing their need for a new car.
Correction: Rental car companies, which account for about 19% of US new car purchases, have been particularly hard-hit by the plunge in air travel. Car rental company Hertz, which last week missed a payment to its lenders on leases they hold for its fleet, said Tuesday that it does not expect to buy any new vehicles for at least the rest of this year. Avis Budget Group also disclosed Tuesday that it has canceled 80% of its US new vehicle purchase orders planned for this year.
An earlier version of this story gave an incorrect figure for GM's first-quarter profit.
