General Motors second quarter earnings take a hit from tariffs
General Motors second-quarter profits dropped 2.8% to US$ 2.4 billion compared to the same period a year ago due primarily to rising domestic steel and aluminum prices as the Trump administration levies tariffs on foreign supplies. Such results led the automaker to lower its earnings forecast for the year, CFO Chuck Stevens said during the conference call.
“We expect this volatility to extend into the second half of the year,” said Stevens. “The new issue is the commodity escalation. The unexpected and accelerating pressure is really on the steel side of the business.”
Although the company sources more than 90% of its steel and most of its aluminum domestically, the tariffs are causing its suppliers to raise prices of the materials.
The increased pricing represents a majority of an expected US$ 1 billion impact in added costs to GM’s business operations this year, up from an earlier estimate of about US$ 500 million, which has led the largest U.S. automaker to lower its guidance on free cash flow for the year from the mid-US$ 5 billion range to US$ 4 billion.
The automaker made US$ 143 million from international business in that same period, with record second-quarter income of US$ 592 million in China as part of its international business. However, the earnings in China were offset by “unfavorable foreign exchange rates in South America.”
“Recent and significant increases in commodity costs and unfavorable foreign exchange impact of the Argentine peso and Brazilian real have negatively affected business expectations,” GM said in its earnings release (PDF).