(Bloomberg) – General Motors Co. cuts its profit outlook for the full year, citing up to $5 billion in automatic tariffs, the biggest financial hottest any company that has stayed away from President Donald Trump’s trade war.
The automaker now expects earnings and taxes ahead of interest to reach the $10 billion to $12.5 billion range, as low as $15.7 billion from its initial guidance in January. According to a letter to shareholders of CEO Mary Barra on Thursday, the reason was due to losses in tariffs.
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Even if Trump issued his guidance, he lowered its guidance by reducing some levy on imported vehicles and parts. Even so, GM is expected to earn profit this year unless cuts in trade deals can reduce exposure to automakers.
“We look forward to a fierce dialogue on evolving trade and other policies,” Barra said in the letter. “As you know, ongoing discussions with key trading partners may also have an impact. We will continue to be agile and disciplined and keep you updated as we understand.”
Just two days ago, General Motors (GM) proposed guidance and delayed earnings calls with analysts, saying it needed to view more tariff details from the Trump administration.
GM shares rose 2.8% before regular trading in New York on Thursday.
Trump signed two executive orders on Tuesday, reducing his initial tariffs on vehicles and parts. The first executive order puts vehicles under probation under separate tariffs on aluminum and steel, so taxes, parts and metals are not more complicated.
He also changed the 25% tariff on imported auto parts that came into effect on May 3. Automakers that manufacture and sell completed cars in the United States can demand offset value up to 3.75% of the value of a U.S.-made vehicle.
The offset will decrease by up to 2.5% of the value of these cars in one year and then be eliminated in the second year. The offset will be used for cars produced after April 3.
Automakers still assume 25% responsibility for imported vehicles, which would hurt GM as it makes several popular models in Canada, Mexico and South Korea. The company has a factory in Canada and Mexico, making it the most profitable and sales pickup truck. Its most affordable model, the Chevrolet Equinox family SUV and the Chevy Trax Compact SUV, are also made outside the United States.
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The automaker has been working to reduce its impact on tariffs and reduce its impact on profits. Every move: Increase pickup truck production at an Indiana factory to meet demand, and the trucks are hit by tariffs.
In a slide of the speech released Thursday, the company said it expects tariff exposure to offset by U.S. production to be at least 30%.
General Motors said on April 29 that it beat Wall Street estimates with a profit of $2.78 per share, but profits fell due to lower truck production and foreign exchange costs.
The company also moved to keep cash. General Motors cut capital expenditure by $900 million to $1.8 billion in the first quarter.
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