GM and Ford’s profit expected to drop on failed EV bets and cyberattack

General Motors and Ford may post lower profit when they report quarterly results this week, as the industry’s high-stakes bet on EVs fails to pay off, while a cyberattack on a crucial computer network used by dealerships disrupted sales.

GM is expected to report a 7.7% drop in second-quarter net income, while Ford is expected to post a 10% drop in profit, according to data from LSEG. GM is scheduled to report its results on Tuesday and Ford the next day.

The cyberattack-induced outage at CDK forced the retail technology provider to shut down a key software system used at more than 15,000 US car dealerships in June, a major sales month in the industry.

Dealers are estimated to collectively lose about $1bn due to the outage, according to consultancy firm Anderson Economic Group.

A slowdown in growth of EV sales is also making it harder for automakers such as GM and Ford to boost volumes to levels where they can drive down costs and hit profitability sooner.

“It can’t be expected that established vehicle manufacturers, who need to make similar investments that a start-up would in vehicle design and manufacturing facilities, could turn a profit immediately,” said Sam Fiorani, vice-president at research firm AutoForecast Solutions.

Legacy American carmakers are also seeing their EV ambitions being throttled by cut-throat competition from Chinese EV makers and Tesla, which have triggered a price war globally.

GM last week declined to reiterate its previously announced forecast that it would have a million units of EV production capacity in North America by end-2025.

Ford had also outlined plans to use a Canadian plant it had earmarked for a future EV to instead build larger, petrol-powered versions of its flagship F-Series bakkie.

Ford previously said it would delay the launch of its new three-row EVs that would be built at its assembly complex in Oakville, Ontario to 2027 from 2025. Both Detroit automakers also reported slower sales growth for the quarter earlier this month.

Evercore ISI analysts said they remain positive on GM, particularly over Ford, and expect the Detroit automaker to guide towards the upper end of their prior full-year forecast.

Investors will look for more details on EV plans as both automakers have cited consumer demand as a cause for pushing out forecasts for those vehicles, as well as comments on the impact of outage at CDK.

Reuters