GM Posts $800 Million Loss In Second Quarter, But North American Unit Remained Resilient

General Motors Co. (GM) reported a second-quarter 2020 loss of $806 million, or $0.56 per share, on revenues of $16.8 billion, as the automakers' plants were frequently shut down by the COVID-19 pandemic.

However, Investors.com reported that Wall Street analysts expected GM to post a loss of $1.72 loss per share for the quarter.

In the second quarter of 2019, GM posted a profit of $2.42 billion on revenues of $36.1 billion.

Sales of GM's new vehicles plunged 34.6% in the U.S. and by 5.3% in China in the latest quarter.

GM said its second quarter 2020 sales were hurt by “the COVID-19 pandemic and tight dealer inventories caused by the production shutdown in the first and second quarters.”

Although GM’s North American factories were shut during eight out of 13 weeks during the second quarter due to the coronavirus pandemic, these regional operations almost broke even -- losing only $101 million in the quarter. But that compares to net income of more than $3 billion in the year-ago quarter in North America.

The automaker also said it burned through about $7.8 billion in cash during the quarter.

But GM also noted it expects to generate $7 billion to $9 billion in free cash flow in the second half of the year – assuming “continued economic recovery” GM’s Chief Financial Officer Dhivya Suryadevara said according to CNBC.

Suryadevara further told reporters in a conference call that GM expects to repay a $16 billion revolving credit line it secured in March by the end of the year. She described the second quarter as an “extraordinary time” for the global automotive sector.

However, the company decided not to release new guidance for 2020 due to uncertainties over the pandemic.

“We have a track record of making swift and strategic decisions to ensure our long-term success for the benefit of all our stakeholders,” said Chairman and CEO Mary Barra. “We will continue to drive the necessary change throughout the company to enable growth as we prepare to deliver a world with zero crashes, zero emissions and zero congestion.”

Suryadevara also noted that in the first half of the year, GM made significant cuts in advertising and other discretionary spending, compensation deferments and employee furloughs. Some of these measures will be permanent, she added.

“When you step back and look at these results, we believe this demonstrates the actions we’ve taken over the past few years to be more resilient, to reduce our fixed costs and to lower our break-even point and really improve our earnings power so we can invest in our future,” she said.

GM also said it seeks to invest $20 billion in autonomous and all-electric vehicles through 2025

Before the earnings release, Bank of America Merrill Lynch analyst John Murphy warned the second quarter will likely be “the toughest in modern history” for the auto industry as companies “grappled with close to a zero revenue environment for a few months.”

The Detroit Free Press noted that Jessica Caldwell, executive director of insights at Edmunds.com, an online information source for the auto industry, said GM should be praised for "pivoting quickly and rolling out blockbuster incentive programs that arguably kept the industry afloat through its most challenging period in more than a decade."

Caldwell added: "With the worst quarter now behind GM, the company – like all automakers – is challenged to sell in a world filled with uncertainty for consumers, employees, and operations. GM has reaffirmed its commitment to autonomous technology and electrification in the long term, but the company has had inventory challenges with the pandemic as well as the strike last year which has made it that much harder to capitalize on opportunities in the short term."