General Motors said it would remove its "Covid Playbook" to offset the full tariffs from President Donald Trump and cut costs as it cuts annual profit guidance for the year.
The U.S. automaker said in a letter to shareholders on Thursday that it is now expected to report annual adjusted revenue between $10 billion and $12.5 billion before interest and taxes, compared with previous revenue of $13.7 billion to $15.7 billion.
Just two days ago, the company had removed guidance and temporarily suspended stock buybacks due to uncertainty surrounding U.S. trade policy, marking the latest automaker to abandon or cut its prospects in recent days.
GM warned that even after Trump released some of his steepest tax revenue to the auto industry earlier this week, vehicles imported from South Korea and vehicles imported from South Korea had $20 billion, including $200 million from South Korea.
The company said it plans to offset 30% of the $5 billion exposure by making more cars, battery modules and other components in the U.S. rather than raising prices. It also plans to make its electric vehicles more cost-effective while continuing to invest in gasoline cars.
"The environment is still smooth," said Chief Financial Officer Paul Jacobson.
He added that GM will reduce non-essential spending while making sure not to cut too much: “We’ve come up with Covid Playbook. (But) we don’t want to panic.”
Automakers have been struggling to keep pace with frequent changes in tariff policies and profits in the first quarter fell even before the full tax on imports of foreign-made vehicles was imposed at 25%. A day ago, American motorcycle maker Harley-Davidson guided Thursday under Thursday's guidance.
In a speech in Michigan on Tuesday, Trump offered small discounts to automakers who made vehicles in the U.S. to offset their wider tax costs and to exempt government tariffs on steel and aluminum for imported parts.
Mary Barra, CEO of General Manager, told investors: "Trade discussions are being held with very important trading partners. We will monitor the situation for this."
GM shares rose 2% in morning trading in New York.
The discount announced by Trump applied for U.S.-assembled vehicles, while GM will sell about half of the vehicles it sells in the U.S. in Mexico and Canada, including its popular Chevrolet Silverado pickup truck.
Components of Mexico and Canada that comply with the 2020 USMCA Trade Agreement rules will not be tariffed. Non-compliant vehicles will face a maximum tariff of 25%.
Barra said 80% of the parts used in GM's assembled vehicles comply with USMCA, and all its vehicles built in North America comply with regulations.
To ease tariffs, GM said it plans to increase production of full-size pickup trucks every year at its assembly plant near Fort Wayne, Indiana, about 50,000 units per year. "We are developing plans to further increase U.S. automobile production," Barra said.
According to S&P Capital IQ, adjusted earnings for the first quarter were $3.5 billion before interest and taxes, down 9.8% year-on-year, and revenues rose 2.3% to $4.4 billion, slightly higher than average analyst estimates.