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 Detroit automaker said Tuesday morning in a public filing that $1.2 billion of the impact would be non-cash, special fees as a result of modifications to the capacity of its electric vehicles. 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 planning to invest $30 billion by this year in electric vehicles, including dozens of new models and battery production capacity.

The accusations come amid changing regulations surrounding electric vehicles — particularly the end of the $7,500 federal tax credit — under the Trump administration compared to President Joe Biden, who has championed the vehicles.

“Following recent U.S. government policy changes, including ending certain 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 to make,” Murphy, now with Haig Partners, said in June during an event for Bank of America’s “Car Wars” report. “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 It announced a $1.9 billion impact from its electric vehicle plans.

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

General Motors, which offers most electric vehicle models in the United States, has made big gains this year in electric vehicle sales, but the size of the market is very small compared to expectations at the beginning of this decade.

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 — besting Hyundai Motor, including Kia, with 8.6% through September, Motor Intelligence reported. It still trails the US electric vehicle leader Teslawhich is expected to have a market share of 43.1% as of September.