General Motors, $GM, profit nears a record a year after saying it couldn't afford its workers' pay demands

General Motors (GM) posted much stronger-than-expected third-quarter earnings and provided an outlook suggesting it’s on track for record profits in 2024, just a year after enduring a costly strike by the United Auto Workers (UAW) union.

GM reported an adjusted profit of $3.4 billion for the third quarter, up from $3.2 billion in the same period last year, which had been impacted by the first two weeks of a strike that lasted more than six weeks. Adjusted earnings for the first nine months of 2024 totaled $9.9 billion.

Revenue surged more than 10%, reaching $48.8 billion, beating forecasts by nearly $800 million. This increase far outpaced the 5% rise in vehicle sales, indicating that GM is selling cars at higher prices than last year. The average transaction price for vehicles in North America climbed to nearly $50,000.

In 2023, GM estimated the strike cost the company $1.1 billion. Throughout the strike, GM maintained that it couldn’t meet union wage demands while remaining competitive with nonunion automakers. However, the company eventually agreed to an 11% immediate wage hike and additional raises that will boost wages by at least 14% over the next four years.

During the strike, the UAW’s slogan, "Record profits should result in a record contract," became a rallying cry. The final deal included the largest wage increases the union has ever secured from GM.

Despite these challenges, GM raised its earnings outlook for the remainder of the year, suggesting full-year earnings will surpass the record profit of 2022.

The positive earnings report and guidance pushed GM shares up 2% in premarket trading. By Monday’s close, its stock had already risen 37% this year.

GM CFO Paul Jacobson acknowledged that the company cut costs in advance of the strike, anticipating wage increases for its union workers. “We’ve been able to look at that as the cost of doing business,” he said. “No regrets over the UAW contract.” Jacobson also praised GM’s ability to raise its profit target, despite "inflationary pressure."

However, GM faced challenges in its nonunion operations in China, reporting a loss of $137 million in the quarter, compared to a $192 million profit in the same period a year earlier. Vehicle sales in China dropped 37% to 372,000 units due to increased competition from Chinese automakers and "challenging market conditions." Once GM’s largest market, China’s third-quarter sales now represent just over half of its U.S. sales volume.