As GM goes...does the nation still go?

Investment Analysis Clubs Macro Economic Trends and Risks
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The quote “As GM goes, so goes the nation” is attributed to Charles Wilson, who was the president of General Motors in 1953.

That hasn’t been true for a long time. Is it true now?

https://www.wsj.com/business/autos/general-motors-gm-q2-earnings-report-2025-stock-3418ac97?mod=hp_lead_pos1

GM Profit Shrinks After $1.1 Billion Tariff Hit

Automaker warns tariff impact will be greater next quarter

By Christopher Otts, The Wall Street Journal, Updated July 22, 2025

GM Profit Shrinks After $1.1 Billion Tariff Hit

Automaker warns tariff impact will be greater next quarter

By Christopher Otts, The Wall Street Journal, Updated July 22, 2025 9:03 am ET

  • GM’s Q2 net income fell 35% despite sales gains, impacted by $1.1 billion in tariffs, according to its latest earnings report.

  • Despite tariff impacts, GM maintains its full-year profit guidance, with international business offsetting North American weakness.

  • GM is shifting some production to the U.S. and investing in both EV and gas-powered engine plants amid evolving trade policies.

  • GM’s Q2 net income fell 35% despite sales gains, impacted by $1.1 billion in tariffs, according to its latest earnings report.

General Motors managed to beat analyst expectations Tuesday when it reported second-quarter results, but new tariffs on imported cars and auto parts took a $1.1 billion bite out of its bottom line.

GM’s net income shrank 35% in the second quarter despite strong sales gains at dealerships as President Trump’s automotive tariffs weighed on the largest automaker in the U.S. The company this spring lowered its earlier profit guidance for 2025. Now GM says greater impacts are expected to hit the carmaker in the third quarter, though the company maintained its profit guidance for the full year… [end quote]

Yesterday, Stellantis reported a similar situation.

https://www.nytimes.com/2025/07/21/business/stellantis-profit-trump-tariffs.html

Stellantis Says Profit Plunged as Tariffs Began to Bite

The company, which owns Jeep, Peugeot, Fiat and other brands, said it might soon have to begin raising prices.
By Jack Ewing, The New York Times, July 21, 2025

Stellantis, the maker of Chrysler, Jeep and Ram vehicles, reported a big loss on Monday, which it attributed, in part, to President Trump’s tariffs and other Republican policies.

The company, which also owns European brands, including Peugeot, Fiat and Opel, said it lost 2.3 billion euros ($2.7 billion) in the first half of the year after revenue fell 13 percent to €74.3 billion…

Tariffs cost Stellantis €300 million during the first half of the year, the company said, while factory shutdowns related to Trump trade policies contributed to a 25 percent decline in the number of cars delivered to U.S. buyers. Tariffs may soon force the company to begin raising car prices, Doug Ostermann, the company’s chief financial officer, said during a conference call on Monday.

“Tariffs are inherently inflationary,” he said… [end quote]

As of July 13, 2025, the U.S. government has collected $100.5 billion in tariffs this year. This represents a significant increase, being 111.5% more than the same period last year.

On August 1, just a week from now, large increases in tariffs on major trading partners will kick in. (Barring TACO.)

The money will come from a combination of lower corporate profits and higher consumer prices.

The stock market is at a bubble extreme. Whatever you may think about John Hussman as a perma-bear please look at the charts in this article.

The stock market is vulnerable because bubbles can be popped.

The bond market is vulnerable because lenders will demand higher yields on long-term debt if they anticipate inflation. Even the 10-year TIPS yield has been rising since January 2025 – and the TIPS is inflation-indexed. This shows a trend of bond investor uncertainty about the future of long-term yields in general.

Take a look at the yield curve chart. Slide the vertical red line on the right-hand chart to the left (earlier in time). The long duration side of the yield curve (10 to 30 years) has moved to higher yields. Owners of existing long bonds will be hurt since prices drop when yields rise.

At the same time, junk bonds are having a field day. Spreads are very low and the financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems are very loose.

The current stock and junk bond markets reflect the general feeling of speculative excitement. But the hits to the economy by the tariffs may shift the trend dramatically in 3Q25.

If the nation goes the way of GM.

Wendy

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As of July 13, 2025, the U.S. government has collected $100.5 billion in tariffs this year. This represents a significant increase, being 111.5% more than the same period last year.

That is approximately 295 dollars per every person living in the United States. Some will pay more and some will pay less.

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The interesting thing is how the various companies are dealing with the situation.

GM has announced it is budgeting $4B to move production from Mexico and Canada to the US.

Strabismus announced a huge writedown of development projects and “platform impairments”. That “platform impairments” sounds like writing off platforms that are made in Mexico or Canada, or models in the EU that the company deems redundant.

Honda, Nissan, and Subaru have announced increases in US production, at the expense of plants in Japan.

Ford is closing a plant in the US that builds ICE compact SUVs, supposedly to retool for EVs. There have been no announcements about moving any production to the US from Mexico.

For some reason, Ford needs a week longer than GM and Strabismus to cook it’s numbers. They will announce after market close on July 30.

Steve

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Looks like GM shareholders paid $1.1B of it! (in reduced profits)

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Yeah, but the “JCs” among the shareholders get it back in tax cuts. :slight_smile:

Steve

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So they ate some of the tariffs or all of them? They could have eaten them all, since they didn’t raise prices.

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Dealbook the NYT by Andrew Ross Sorkin

Wall Street had set a pretty low bar for this earnings season. Fears that President Trump’s trade war would roil supply chains and inflation and concerns of consumers pulling back on purchases were expected to weigh on corporate profits and guidance.

So far, that hasn’t materialized. The S&P 500 closed at another record yesterday, helped by a batch of somewhat upbeat earnings calls, even with little evident progress on trade talks before Trump’s Aug. 1 tariffs deadline.

But a new test begins this week. Bellwethers like Coca-Cola and General Motors are next in line. The carmaker this morning reported a second-quarter sales decline, and said that tariffs on foreign-made vehicles and parts wiped out $1.1 billion in profits in the same period. Stellantis said something similar yesterday.

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Automakers typically have a 60 day supply of finished cars, sometimes a lot more. So GM could have all the cars imported in May and June still sitting on the lot, so they haven’t recouped the tariff they paid when the cars cleared customs.. In May, Ford announced price increases on all it’s Mexican built models, effective for cars built after May 2. It will be interesting to compare what Ford blames on tariffs, vs the $350M at Strabismus and the $1.1B GM blamed on tariffs.

Steve

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