NEW YORK: Higher commodity costs due to the US-Iran war overshadowed General Motors' solid earnings and a new share buyback announcement Tuesday, sending shares lower.
The Middle East conflict has fuelled a surge in copper, steel and diesel prices, adding US$400 million to costs for 2026, chief financial officer Paul Jacobson said on an earnings conference call.
"We have seen a significant amount of inflation... really just in the last probably 10 weeks," he said.
Despite these dynamics, GM reported third-quarter profits of US$3.3 billion, more than double last year's level, which was marred by one-time costs connected to unwinding electric vehicle investments.
Revenues rose 2.9% to $50.1 billion.
General Motors shares slumped 8.1% in afternoon trading.
Although GM saw lower auto sales in North America and some other markets compared with the year-ago level, its average vehicle price of US$52,000 was above last year's, reflecting "sustained" demand for large trucks and luxury vehicles, the company said.
GM plans to launch revamped models of the 2027 Chevrolet Silverado and GMC Sierra pickup trucks in the upcoming stretch.
"While the path forward is more challenging, we continue to believe that 2027 will be another strong year and better than 2026, assuming customer demand remains strong and commodity, logistics and other recent cost pressures moderate," chief executive Mary Barra told analysts.
The company has sharply slowed its EV ramp-up following regulatory changes enacted by US President Donald Trump. But GM reiterated plans for additional hybrid vehicles and will provide more details closer to the launches.
GM now forecasts full-year adjusted earnings of between US$12.75 and US$13.75 a share, a higher mid-point than the previous outlook.
However, Briefing.com noted that that midpoint of the range is below the level projected by Wall Street analysts.
"While internal drivers remain favorable, including lower EV losses, improving warranty expenses, and favorable vehicle mix, intensifying commodity and logistics costs and higher launch-related expenses are creating a more challenging earnings backdrop," said Briefing.com in a note.
Equity analysts at JPMorgan Chase described GM's results and outlook as largely in line in a note that pointed to questions about an outlook that describes 2027 as likely "better" but which is conditioned on moderating costs.
"GM has demonstrated strong execution over the last several years, we believe investors are likely to question conviction for now, given increasing commodity and logistics costs," among other questions, JPMorgan said.
UAW rips buybacks
GM's new US$20 billion shareholder repurchase plan follows the completion of its latest $6 billion plan.
Presentation slides from the company emphasized its gradual reduction of outstanding shares over more than a decade as increasing "the potential for operating performance to translate into stronger per-share results."
Since 2015, GM has made US$42.7 billion in share repurchases, reducing common shares by 45%.
"We're really trying to signal that we believe the company is undervalued, and so we think this is the best way to provide value for our shareholders," said Barra, who declined to put a timeframe on the newly-announced repurchases.
Meanwhile, UAW president Shawn Fain said GM's buybacks were the latest sign the company "has sold its soul to Wall Street," according to a statement.
"Corporate America is destroying this country by looting the Rust Belt to pay off millionaires and billionaires for short-term gain," said Fain, who vowed to hold management accountable in 2028 contract negotiations.
"If there'sUS $20 billion for Wall Street, you better believe there’s our fair share for the working class," said Fain, who successfully won wage hikes from GM, Ford and Stellantis in a three-pronged strike in 2023.