GM will take a $1.6 billion charge related to the recall of electric vehicles

Detroit – GM Next week’s third-quarter results will include a $1.6 billion impact from all-electric vehicle plans that didn’t pan out as expected.

The automaker in Detroit Tuesday morning in a Public filing It said $1.2 billion of the impact would be non-cash, special fees as a result of modifications to electric vehicle capacity. The other $400 million in cash is primarily related to contract cancellation fees and trade settlements associated with electric vehicle-related investments, according to the filing.

The automaker said a re-evaluation of its electric vehicle manufacturing capacity and manufacturing footprint is “ongoing,” suggesting that additional charges may be announced for future quarters.

The charges will be reported as special items when GM reports third-quarter results on October 21. That means it will impact the automaker’s bottom line but not its adjusted earnings, or adjusted EBIT, which Wall Street is closely watching.

General Motors was one of the first companies to invest billions of dollars in the electric vehicle market, which has not yet reached its peak. At one point, the company was It plans to invest $30 billion By this year in electric vehicles, including dozens of new models and battery production capacity.

These accusations come amid changing regulations surrounding electric vehicles – in particular End of $7,500 federal tax credits – Under the Trump administration compared to President Joe Biden, who championed vehicles.

“Following recent U.S. government policy changes, including ending some tax incentives for consumers to purchase electric vehicles and reducing the stringency of emissions regulations, we expect the rate of EV adoption to slow.” GM said in the filing.

John Murphy, a longtime analyst at Bank of America, earlier this year warned of such cuts for automakers that have invested heavily in electric vehicles.

“There are a lot of tough decisions we have to make,” Murphy, now at Haig Partners, said in June during a Bank of America event. Report on “Car Wars”.. “Based on the study, I believe we will see multi-billion dollar writedowns making headlines in the next few years.”

GM’s EV recall comes more than a year after its crosstown rival ford motor Announce a Impact of $1.9 billion Of its EV plans.

Ford listed about a $400 million write-down on manufacturing assets, plus additional expenses and cash expenses. Up to $1.5 billion This included canceling its large three-row electric SUV that was already in development and delaying production of its next-generation full-size electric pickup truck.

General Motors, which offers Most electric car models In the United States, there have been big gains this year in electric vehicle sales, but the size of the market is favorable compared to expectations at the beginning of this decade.

Motor Intelligence reported that the Detroit automaker went from an 8.7% market share in all electric vehicles to start this year to 13.8% during the third quarter — leading Hyundai Motorincluding Kia, by 8.6% through September. It still trails the US electric vehicle leader Teslawhich is expected to have a market share of 43.1% as of September.