GM Slashes 2025 Earnings Forecast by 30% Due to Tariff Concerns

General Motors (GM) has revised its profit expectations for 2025, citing potential tariff impacts that could reach as high as $50 billion. This adjustment comes after the White House clarified and softened its stance on automotive tariffs earlier this week.

In a letter to shareholders, GM's CEO Mary Barra stated that the company will continue to engage in dialogue with the Trump administration regarding trade policies and other developments. Barra noted that ongoing discussions with major trading partners could also have an impact.

GM, based in Detroit, withdrew its previous forecast, which did not account for automotive tariffs, just two days after issuing it in January. The revised annual core earnings are now projected to be between $100 billion and $125 billion, including the current $40 billion to $50 billion tariff risk. Chief Financial Officer Paul Jacobson informed analysts during a conference call that the tariff exposure includes lower-priced vehicles imported from South Korea, amounting to approximately $20 billion. These vehicles are entry-level Chevrolet and Buick models produced in South Korea.

Jacobson mentioned that GM's new guidance assumes the company can offset at least 30% of the tariff costs. He added that since the election, GM's manufacturing and supply chain teams have been focused on developing strategies to mitigate potential tariff impacts. These strategies are currently being actively implemented, and additional relief measures, including cost reduction targets, will be taken as appropriate.

Barra informed analysts that to alleviate the impact of tariffs, gm is collaborating with suppliers to further increase U.S. content, thereby complying with the USMCA trade agreement at a higher level. The automaker is also increasing its production of battery modules manufactured in the U.S., which Barra described as a "low-cost way to increase U.S. content."

She stated, "While taking these actions, we are also carefully reviewing discretionary spending across the board."

GM's previous earnings guidance was $13.7 billion to $15.7 billion. The company now expects full-year net earnings to be between $8.2 billion and $10.1 billion, down from the previous range of $11.2 billion to $12.5 billion. GM anticipates capital expenditures for 2025 to be between $10 billion and $11 billion.

Barra mentioned during an interview on Thursday morning that additional plans to increase U.S. production are expected to be announced. She stated, "We are making commitments to bring more production back to the U.S. based on our current footprint."

Barra also noted that the company assumes a pricing environment similar to the current one, despite industry estimates that new car prices could rise by thousands of dollars under the tariffs.

The 25% automotive tariffs imposed by Trump took effect in early April. After weeks of lobbying by automakers for leniency, the Trump administration announced new automotive tariff policies this week to ease some of the tariff burdens while companies work to expand their U.S. operations.

These changes allow automakers to offset tariffs on imported vehicle parts used in U.S.-assembled cars. Additionally, these vehicles and parts will no longer be subject to Trump's other tariffs, including a 25% tariff on steel and aluminum and a 10% tariff on most other countries.

Tariffs have also led to the withdrawal of financial guidance by Jeep and Ram Truck manufacturer Stellantis, a Detroit-based competitor of GM. On a more positive note, executives have seen an increase in new car sales as consumers rush to purchase vehicles before tariffs affect prices. Ford Motor Company reported a 16% increase in sales for April, while GM announced a 20% increase in sales for the same month, marking the best April retail sales (sales to individual customers) since 2007.