General Motors’ first-quarter net income fell 88%, but it still managed to make $247 million despite the arrival of the global coronavirus pandemic.
U.S. automakers suspended production in much of the world in late March. For GM, that clipped revenue for the quarter by 6%, to $32.7 billion, but that’s not as bad as industry analysts had been expecting.
Shares jumped 7.2% at the opening bell Wednesday.
The company essentially has been without revenue since early March, meaning that the second quarter almost certainly will be worse.
However, GM plans to reopen most of its U.S. and Canadian factories starting May 18, and Chief Financial Officer Dhivya Suryadevara said there are signs that demand for cars and trucks exists despite the pandemic.
On a conference call with reporters Wednesday, Suryadevara said demand has been stronger in some pockets of the U.S. where truck sales are high and cases of the coronavirus are relatively low. North America is by far GM’s most profitable market.
“There are bright spots within the industry,” Suryadevara said. “Obviously trucks are our strong suit, and that’s something we’re going to capitalize on.”
GM reported that recent sales declines have been far smaller in southern, southwest and western U.S. states than in areas such as New York and Michigan, which have been hit harder by the virus.
GM has suspended its full-year financial guidance, and Suryadevara conceded the second quarter will be tough. She said she can’t predict consumer demand for certain, but believes that customers are moving to online sales. GM’s sales website has had a 40% increase in traffic since the pandemic began, she said. Many states have forced auto dealers to close showrooms.
About 85% of U.S. dealers are selling vehicles online with about 3,500 participating, she said. About 90% of them are offering home delivery of new vehicles.
During the past two months GM canceled its quarterly dividend for the first time in six years, suspended share buybacks and drew $16 billion from credit lines to prepare for the pandemic.
Suryadevara said GM entered the crisis from a strong position as it shed unprofitable businesses and restructured to cut costs. The company burned through $900 million in cash from January through March, reflecting the normal seasonal spending plus $600 million in costs due to the virus, she said.
GM, she said, made $1.2 billion before taxes, but that was cut by $1.4 billion due to the pandemic. In North America, GM made $2.2 billion before taxes, which was $300 million higher than a year ago.
With the increased borrowing, GM had $33 billion available at the end of March, she said, adding that reopening factories will help with cash flow and liquidity.
On a net basis, the Detroit automaker made 17 cents per share in the first quarter. Excluding one-time items, the automaker made 62 cents per share, much better than the per-share earnings of 40 cents that Wall Street had expected, according to a survey by FactSet.
GM’s crosstown rivals, Ford and Fiat Chrysler, also are likely to reopen their plants on May 18 as well.