General Motors (GM) stock surged after the automaker reported mixed third quarter earnings but improved its full-year profit outlook, as the biggest of the Detroit Three grapples with President Trump’s auto tariffs.
GM now sees full-year EBIT in a range of $12.0 billion to $13.0 billion (previously $10 billion to $12.5 billion), with adjusted automotive free cash flow of $10.0 billion to $11.0 billion (prior $7.5 billion and $10 billion). It also forecasts adjusted earnings per share (EPS) of $9.75 to $10.50 diluted (versus $8.25 to $10.00 before).
GM said its full-year tariff exposure is now seen at around $3.5 billion to $4.5 billion, assuming current levy rates remain the same and that indirect costs from suppliers do too. Last spring, the automaker lowered its full-year guidance to include a possible $4 billion to $5 billion impact from auto tariffs.
GM shares jumped 8% in premarket trade.
“Based on our performance, we are raising our full-year guidance, underscoring our confidence in the company’s trajectory,” GM CEO Mary Barra said in her shareholder letter.
“I also want to thank the President and his team for the important tariff updates they made on Friday. The MSRP offset program will help make U.S.-produced vehicles more competitive over the next five years, and GM is very well positioned as we invest to increase our already significant domestic sourcing and manufacturing footprint,” she added.
GM also said tariff mitigations were expected to offset 35% of the cost, thanks to a lower tariff base.
For the third quarter, GM reported net revenue of $44.26 billion compared with the $45.18 billion estimated per Bloomberg consensus, based on Q3 adjusted EPS of $2.80 versus the $2.27 expected. Adjusted EBIT came in at $3.376 billion, compared with $2.72 billion estimated.
GM said tariff costs for the third quarter came in at $1.1 billion after mitigation efforts.
GM said sales-wise, its use of incentives was low. It had an average of 4% of ATP (average transaction price), compared to the industry average of 6.9%.
Earlier in October, GM said Q3 sales hit 710,347, an 8% jump compared with a year ago. The automaker said it was No. 1 in overall sales in the US and snagged its best market share since 2017.
Gas-powered vehicles — including its pickup trucks like the Chevrolet Silverado and full-size SUVs like the GMC Yukon — drove the gains. Both categories are poised to lead the industry by the end of the year, GM said.
Not surprisingly, GM’s EV sales surged in Q3 ahead of the expiration of the $7,500 federal EV tax credit to record of 66,501 units sold in the quarter
But the EV business is expected to throttle down a bit after expiration of the tax credit.
The automaker said last week it will take a $1.6 billion charge from a reassessment of its EV plans, with $1.2 billion of the impact being non-cash special charges as a result of adjustments to its EV capacity. The other $400 million in cash is primarily related to contract cancellation fees and commercial settlements associated with EV-related investments, GM said.
“With the evolving regulatory framework and the end of federal consumer incentives, it is now clear that near-term EV adoption will be lower than planned,” Barra said in her letter. “That is why we are reassessing our EV capacity and manufacturing footprint. The work, which is ongoing, resulted in a special charge in the third quarter, and we expect future charges.”
The other big issue looming for GM is tariff cost exposure.
In an effort to combat the effect of tariffs and boost US production, GM committed $4 billiion to expand its US manufacturing capabilities.
GM’s hits to its guidance and increased spending are taking a toll on other US manufacturers, including Ford (F), Tesla (TSLA), and even foreign automakers such as Toyota (TM) that build in USMCA countries like the US, Canada, and Mexico.
Anderson Economic Group reported that tariffs on cars and parts from Canada and Mexico alone costed automakers over $6 billion this summer and will top $10 billion in aggregate by the end of this month.
Pras Subramanian is Lead Auto Reporter for Yahoo Finance. You can follow him on X and on Instagram Instagram.