General Motors (GM) Stock: How GM Plans to Absorb a $5 Billion Tariff Punch

TLDR

GM expects $4-5 billion hit from Trump’s auto tariffs Company slashed its 2025 profit outlook despite some tariff relief CEO Mary Barra says vehicle pricing will remain “about the same” GM plans to offset 30% of tariff exposure through increased U.S. production Additional $500 million expense coming in Q2 for recall of 600,000 vehicles

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General Motors has significantly reduced its profit forecast for 2025, primarily due to the impact of President Donald Trump’s new auto tariffs. The Detroit-based automaker now expects these tariffs to cost the company between $4 billion and $5 billion, according to statements made by CEO Mary Barra.

General Motors Company (GM)

The revised guidance comes despite Trump’s recent announcement that the administration will alleviate some tariffs on the auto industry and prevent “stacking” of tariffs.

In an investor call, GM outlined its updated financial projections. The company now expects adjusted earnings before interest and taxes (EBIT) to be between $10 billion and $12.5 billion.

This represents a major reduction from its previous forecast of $13.7 billion to $15.7 billion, which did not account for the tariff impact.

GM also lowered its net income guidance to $8.2 billion to $10.1 billion, down from $11.2 billion to $12.5 billion previously forecasted.

The adjusted earnings per share (EPS) guidance was reduced to a range of $8.25 to $10.00.

Additionally, GM expects its adjusted automotive free cash flow to be $7.5 billion to $10 billion, down from the previous projection of $11 billion to $13 billion.

Pricing Strategy Amid Tariffs

Despite the substantial financial hit from tariffs, Mary Barra stated in a CNN interview that GM does not plan to pass these costs onto customers.

“We believe pricing is going to stay at about the same level as it is,” Barra told CNN on Thursday.

She added, “Pricing changes in our industry at least monthly, and sometimes more frequently. We’re going to respond to the market.”

This approach mirrors that of competitor Ford Motor Co. (F), whose CEO Jim Farley recently announced the company would not increase prices but instead extend its employee pricing program.

Cost-Cutting Measures

Beyond tariff challenges, GM faces an additional $500 million expense in the second quarter related to a recall of nearly 600,000 SUVs and trucks in the United States due to engine issues.

To counter these financial pressures, GM has been implementing cost-cutting measures. In the first quarter alone, the company reduced costs by $900 million, bringing total spending reductions to $1.8 billion.

Looking forward, GM aims to offset at least 30% of its tariff exposure through increased U.S. production of vehicles, battery modules, and other parts.

One key strategy involves boosting production of pickup trucks at its Indiana plant to meet demand with vehicles less subject to import duties.

The company’s stock has declined by over 11% year-to-date. According to TipRanks, GM stock currently has a Moderate Buy consensus rating based on eight Buys, seven Holds, and two Sells assigned in the last three months.

The average price target for General Motors stock stands at $54.26, suggesting an upside potential of 20.44% from its current price of $45.20.

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