GM Earnings Impacted by Chevy Bolt Recall

GM's Bolt Recall Costs and Q2 Earnings

General Motors reported that the dual recall affecting 2017-2019 Chevrolet Bolt electric vehicles incurred a cost of $800 million. This information was disclosed during the company’s second-quarter earnings statement on Wednesday.

A significant portion of GM’s $1.3 billion in warranty expenses for the last quarter stemmed from the expenses related to rectifying the faulty Bolt batteries.

Recall Details and Ultium Platform

During an investor conference call, CEO Mary Barra clarified that the recall is isolated and does not extend to the Ultium platform. This platform represents GM’s developing battery cell technology, created in collaboration with LG Energy Solutions of South Korea.

Barra emphasized that the Ultium system is distinct. She stated that the manufacturing facilities producing Ultium cells will adhere to stringent quality control procedures.

The second Bolt recall was initiated in July. It involved plans to replace defective battery modules to mitigate the risk of fire. GM advised owners to charge their vehicles after each use and maintain a battery level above approximately 70 miles of range until replacement batteries become available.

Financial Performance in Q2

The automotive manufacturer announced revenues of $34.2 billion as part of its second-quarter earnings report. This represents an increase of $1.7 billion compared to the first quarter of 2021 and a $17.4 billion rise from the same quarter last year.

GM also reported a net income of $2.84 billion for the second quarter. This is a substantial improvement over the $758 million loss experienced during the same period last year, which was largely attributed to the pandemic and its economic consequences.

The company’s adjusted income, factoring in the recall costs, amounted to $4.1 billion.

Factors Contributing to Income

Increased used car prices, robust sales of trucks and SUVs, and strong performance from GM Financial contributed to the positive income results.

GM Financial, the company’s lending division, reported net sales of $3.4 billion and an adjusted income of $1.58 billion for the quarter.

According to GM CFO Paul Jacobson, “Record results at GM Financial were driven by continued high used vehicle prices.”

Future Outlook

GM expressed optimism regarding its performance for the remainder of the year. The company has raised its adjusted full-year guidance to a range of $11.5 billion to $13.5 billion, equating to $5.40 to $6.40 per share.

This revised forecast is an increase from the previous guidance of $10 billion to $11 billion, or $4.50 to $5.25 per share.