General Motors warned on Tuesday that its third quarter financial results have been impacted by a $1.6 billion loss from its EV strategy change.
The charges were approved by GM‘s board audit committee last week, and were based on the realignment of the company’s electric vehicle production to match consumer demand.
While the company will only disclose its earnings report next Tuesday (October 21), a public filing has shown that the company estimates a $1.2 billion non-cash impairment, as manufacturing operations were trimmed.
The remaining $400 million represents actual cash costs, mainly from fees and settlements in cancelled contracts with suppliers.
The company stated that it may incur additional significant cash and non-cash charges in the future, which could impact its financial results and cash flows.
Earlier this year, GM halted plans to produce EVs in Orion, telling its employees it would produce internal combustion engine (ICE) vehicles at the site instead, citing higher demand for the powertrain.
The Orion plant is one of three facilities — together with Fairfax, in Kansas, and Spring Hill, in Tennessee — that will share a $4 billion investment to expand production of petrol-powered vehicles.
Last month, Reuters also reported that the company is ending production of two electric Cadillac SUVs in Spring Hill by the end of this year.
However, on Tuesday the company stated that the strategic realignment will not impact its current lineup of Chevrolet, GMC, and Cadillac EVs in production, which will continue to be available to consumers.
General Motors expects “the adoption rate of EVs to slow,” following “recent US Government policy changes.”
On Tuesday’s filing, the company noted that it includes both “the termination of certain consumer tax incentives for EV purchases” on September 30 and “the reduction in the stringency of emissions regulations.”
In the third quarter, General Motors delivered a record 66,501 EVs, as demand rose ahead of the $7,500 consumer credit deadline.
In August, as the company reported its second quarter earnings results, CEO Mary Barra said that “despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star.”
By then, the CEO reaffirmed that the company was adjusting to “changing demand” and wrote that “overall, GM is well positioned to succeed in an ICE market that now has a longer runway.”
