(Bloomberg) -- General Motors Co. unveiled a better-than-expected profit outlook, but US President Donald Trump’s tariff threats raised uncertainty about the automaker’s business. The shares plunged.
Adjusted earnings before interest and taxes this year will range from $13.7 billion to $15.7 billion, the company said Tuesday in a statement that also detailed fourth-quarter results. GM previously indicated that 2025 profit would be in line with last year’s total, which amounted to $14.9 billion.
While the guidance beat Wall Street’s estimates, it was boosted by the decision last year to shutter Cruise, GM’s self-driving car unit. That’s expected to save about $500 million this year, and twice as much in future years, accounting for the bulk of its improved outlook. GM cited heavy development costs when walking away from Cruise, which reported an operating loss of $3 billion last year.
Another big caveat to GM’s forecast: It doesn’t account for the potential of Trump enacting 25% tariffs on Canada and Mexico, which are crucial to the automaker’s supply chain.
“The guidance for 2025 leaves no room for errors, and also does not include impact from regulatory changes in the US, especially on tariffs” and electric vehicles, Daniel Roeska, an analyst for Bernstein, wrote in a research note.
Stock Falls
GM’s shares declined as much as 10% in New York, the largest intraday drop since 2020. The stock gained 48% last year, more than double the gain in the S&P 500 Index.
Trump’s tariff threats create uncertainty for GM and the auto industry. The automaker imports 22% of the vehicles it sells in the US from Mexico, according to S&P Global. GM has a plant in each country making full-size pickup trucks, its most profitable product line. Both countries are a source of many key parts.
GM Chief Executive Officer Mary Barra said on the earnings call that the company is talking to the administration and members of Congress. The automaker has “several levers” it can use to manage tariffs, she said, but gave no specifics.
Mexico also appeared willing to work with the Trump administration to avoid tariffs, Barra said.
There are signs of strength within GM’s new guidance, as well. Robust vehicle sales in the US, which is the company’s most profitable market, will keep margins and cash flow strong. The automaker has also stopped the bleeding in China, ending a string of three straight quarters of losses with a slim profit.
Adjusted for about $4 billion in restructuring charges, GM made positive Ebit in China of $17 million last quarter. That came after the company lost $347 million through the first nine months in China, the world’s largest auto market.
EV Gain
In the US, GM boosted sales 21% in the fourth quarter and avoided the big rebates that some competitors needed to lure buyers. Its electric-vehicle program also cut losses, helping the overall business achieve better profits.
GM’s progress on EV profits could be affected by Trump’s policies. The President has talked about eliminating electric vehicle tax credits, which give consumers $7,500 toward the purchase of multiple EVs that GM sells. Eliminating or reducing those credits could hurt demand.
On the earnings call, Chief Financial Officer Paul Jacobson said GM made a fourth-quarter variable profit, which removes investment and fixed costs and includes the value of electric-vehicle manufacturing credits under President Biden’s Inflation Reduction Act.
GM has targeted cost reductions in its EV program of $2 billion to $4 billion this year, chiefly by getting better economies of scale as sales grow. Jacobson said GM can still achieve the low end of that range.
For the year, GM set an earnings per share record of $10.60 as US vehicle prices held up. As a result, the company will pay out profit sharing to its union represented hourly workforce of $14,500 per employee.
--With assistance from Lindsay Blakely.
(Updates throughout beginning in first paragraph.)
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