DETROIT – The auto industry was always going to take a big hit from coronavirus -- and Wednesday, we learned how bad that hit will be.
In the second quarter of the year -- during the depths of the pandemic -- GM reported it lost $806 million and spun through billions of dollars in cash.
There is no doubt when you see losses of nearly a billion dollars, you think back to a decade ago and worry.
As bad as it was, GM did a lot better than Wall Street’s expectations and that is always good for the bottom line.
GM looked at it as a glass half-full proposition -- When you have the unprecedented problem of a month in the second quarter with no production or sales around the globe, there is only one way to go: up.
“They’ve been pretty resilient and it’s helpful that the most popular product -- the full size pickup -- is among the most profitable in the industry,” said IHS Market analyst Stephanie Brinley. “That is a benefit for them.”
GM burned through about $7 billion in cash and analysts will watch that like a hawk.
Autotrader analyst Michelle Krebs believes the year is about to get better.
“Looking back, April was the absolute bottom and we think the worst is behind us,” Krebs said. “But it’s not going to be totally smooth sailing.”
There remains uncertainty with COVID-19, particularly in states where GM has assembly plants.
“GM has plants in Fort Wayne, Indiana where they build trucks and the Corvette plant in Kentucky,” Krebs said. “That is concerning in terms of where they produce vehicles.”
It would be one thing if GM’s business was mostly small cars, but its strength lies in the market’s sweet spot.
“GM’s challenge is to grind out more trucks and they’re doing things to move people to the truck plants to keep them going,” Krebs said.
GM announced another positive step toward normalcy” they’re going to end the 20% salary deferrals many employees took and pay it back at 6% interest. Still, the executive paycuts will remain in effect.