GM takes $1.6B charge after pullback from EVs

Jeff Kowalsky/Photographer: Jeff Kowalsky/Bloo

General Motors Co. is incurring $1.6 billion in charges tied to its pullback from electric vehicles, a stark indication of the damage that U.S. policy changes will inflict on plug-in cars.

Realigning EV capacity to consumer demand will lead to non-cash impairment and other charges of $1.2 billion, GM said Tuesday in a regulatory filing. The rest of the costs relate to canceling contracts and settling commercial arrangements linked to EV investments and will have a cash impact.

The automaker will recognize the special items in third-quarter results slated for Oct. 21. GM warned that a review of its manufacturing footprint is ongoing and that it's "reasonably possible" it will recognize more charges that hurt results in quarters to come.

The disclosures offer a sobering assessment of the prospects for EVs under President Donald Trump, whose policies threaten to erode already-faltering demand in the U.S. The administration eliminated EV tax credits at the end of last month and has effectively nullified fuel economy and emissions standards, enticing companies to sell more profitable gasoline-powered vehicles.

Carmakers including Ford Motor Co. and Stellantis NV have been shifting product plans to account for an EV market that's less robust than previously envisioned. Tesla Inc. last week introduced less-expensive versions of its top EV models to buoy sales, with chief executive officer Elon Musk having warned of a potential "rough" stretch due to the loss of US subsidies.

GM echoed that sentiment in Tuesday's filing.

"Following recent US government policy changes, including the termination of certain consumer tax incentives for EV purchases and the reduction in the stringency of emissions regulations, we expect the adoption rate of EVs to slow," the company said.

GM's shares traded up 0.7% shortly after the start of regular trading in New York. The stock rose 4.4% this year through Monday's close, trailing the 13% advance in the S&P 500 Index.

Last month, the company said it would relaunch the Chevrolet Bolt EV in December with one shift of production at its plant in Kansas, a reduction from its earlier plan for two shifts. GM also has scheduled downtime in December at a Tennessee factory where it builds the Cadillac Lyriq and Vistiq EVs, and will cut output to one shift from January through May.

The automaker said at the time that it was "making strategic production adjustments in alignment with expected slower EV industry growth and customer demand."

The moves echo those of rival Ford, which has delayed or scrapped some plug-in models and reallocated dollars away from its money-losing EV business. The automaker took a $1.9 billion hit last year linked to canceling plans for an electric sport utility vehicle.

Since then, the outlook for EVs has grown even more uncertain. Ford CEO Jim Farley said last month that the EV market will be "way smaller than we thought."

Automakers benefited from EV sales surging the last few months as consumers rushed to take advantage of the tax credits before they expired. GM's overall US sales rose 8% in the third quarter, with electric vehicle deliveries doubling to more than 66,000 cars and trucks.