General Motors' earnings rose in its first-quarter report, but the company is bracing for increased costs due to the ongoing war in Iran. The Supreme Court's rejection of International Emergency Economic Powers Act (IEEPA) tariffs will save GM about half a billion dollars this year, but commodity inflation is expected to eat up these savings.
The automaker is managing increased variable costs from the war by reducing spending in other areas, according to CEO Mary Barra. This includes higher transportation costs due to rising oil prices.
GM's forecast for full-year 2026 has been revised downward, with the company now expecting to pay between $2.5 billion and $3.5 billion in gross tariff costs, down from an earlier estimate of $3-4 billion.
The reduction in tariff costs comes from GM extrapolating what it will pay in 2026 by removing the IEEPA direct tariffs paid in 2025 from its earlier forecast.
However, potential refunds from those unlawful tariffs paid are still uncertain and will not be factored into the revised forecast.
Commodity inflation is expected to add $1.5 billion to $2 billion this year, up from earlier expectations of $1 billion to $1.5 billion.
The war in Iran has also led to GM International pulling about 7,500 full-size sport/utilities back into North America from the Middle Eastern market.
Despite these challenges, GM maintains its position as number-two in US electric vehicle sales, with Cadillac EVs up 20% year-over-year for Q1.
The company's average transaction price remains high at $52,000, reflecting the strength of its sales of well-equipped full-size pickups and SUVs.
The ongoing Iran war poses a significant threat to the cost gains GM has made in recent years.
