GM invests $1.5 billion to onshore production, scale defense unit

Analysts see overcapacity threat for Hapag-Lloyd and headwinds for European airlines as sector navigates diverging paths

GM Invests $1.5 Billion to Onshore Production, Scale Defense Unit

General Motors is investing up to $1.5 billion this year to shift production to the United States and expand its software capabilities, executives said Tuesday, as the automaker scales a defense business that expects nearly $700 million in revenue and absorbs $2.3 billion in charges tied to a restructuring of its electric-vehicle operations.

The onshoring push will lift GM’s U.S. production capacity to more than 2 million units next year and further reduce the company’s exposure to tariffs, CEO Mary Barra said on a call with analysts. “At the same time, our high-margin software and services revenues continue to grow rapidly, with 1 million new subscriptions expected this year, contributing to more than $3 billion in recognized revenue next year,” she added, according to a Dow Jones Newswires report.

CFO Paul Jacobson said global deliveries fell 7.2% to about 1.43 million vehicles in the second quarter, hurt by the discontinuation of certain models, a significantly smaller electric-vehicle market, and tight dealer inventory, particularly early in the year. Still, he said the company’s efforts to onshore production, launch new vehicles, and expand full-sized SUV capacity should help GM grow revenue, gain market share, and improve profitability in 2027. GM shares rose 3% on the day.

The automaker is also moving aggressively into defense, a sector in which stockpiles have dropped because of the wars in Ukraine and Iran and in which the Trump administration and Pentagon officials have pressed weapons makers to accelerate output. GM is building a backlog of future business, vying for military and defense contracts and collaborating with “leading companies” such as Lockheed Martin, Barra said. “We’re focusing our efforts on strengthening supply chain management, improving manufacturing readiness, and expanding production capacity in ways that serve the United States and its allies,” she said. “Over time, all of this should make GM Defense a more meaningful and diversified contributor to our earnings.”

The $2.3 billion in EV-related restructuring charges included $900 million in supplier-related cash charges, $700 million in cash charges to right-size the battery supply chain with joint venture partners, and $700 million in non-cash write-offs for compliance-related and other asset impairments, Jacobson said. He noted that GM has been working with partners and suppliers to conclude the restructuring quickly. “I’m proud to say that we believe these actions substantially complete the material cash charges we expect to incur as we align our EV capacity and manufacturing footprint with the changes in regulatory policy,” he said.

Analysts See Overcapacity Threat for Shipping, Headwinds for Airlines

Beyond GM, the Market Talk roundup highlighted a series of analyst calls across the transport sector, many of them cautionary.

UBS analyst Cristian Nedelcu wrote that German container carrier Hapag-Lloyd trades at an unjustified premium to historical multiples and compared with peers, noting the industry order book is at a historically high level of roughly 40% of the current fleet. Hapag-Lloyd’s EBIT margins have underperformed versus peers in recent years, he said. “In the context of supply exceeding demand by 2027/28, we expect free cash flow burn across the industry,” Nedelcu wrote. He lifted his price target to 102 euros from 96 euros; the shares, which had upgraded full-year guidance last week, traded 0.9% higher at 124.30 euros.

Bernstein analysts said European airlines face a challenging environment in which access to capital will determine winners and losers. Dublin-based Ryanair, with higher margins and a stronger balance sheet than its main competitors, is better positioned. Rising fuel costs that are set to hit Ryanair in 2027 and 2028 will hurt weaker competitors first, the analysts said, setting the stage for industry capacity cuts. “That raises the risk of industry capacity rationalization near term: either voluntary schedule reductions, or involuntary ones as airlines fall into bankruptcy,” Bernstein said. Ryanair shares fell 0.4%.

In the automotive space, Bernstein analysts separately reiterated an underperform rating on Volvo Car, saying the critical question is whether the automaker’s tough second quarter marks the floor. While the forthcoming EX60 model should help lift group margins over time and management expects an improved U.S. pricing environment, the bank pointed to a reduced year-on-year impact from cost savings, increasing raw material headwinds, and a EX60 ramp that will only materially affect the fourth quarter. “In the face of rising competition from Chinese brands, Volvo lost market share in Europe in H1, and we do not see the wave of new competition slowing down,” Bernstein wrote. Volvo Car shares rose 1.2% to 19.38 Swedish kronor.

RBC Capital Markets took a more favorable view of the heavy-duty truck market, noting that Volvo Group’s second-quarter results showed a sharp ongoing recovery in North America coupled with high, stable demand in Europe. Strong truck order intake should enable a substantial production ramp-up in the second half, supporting capacity utilization and profitability, analyst Nick Housden wrote. RBC retained its sector perform rating and 360 kronor price target; Volvo Group shares slipped 0.1%.

Goldman Sachs initiated coverage of four Indian auto parts makers, saying the companies are starting a transformation into adjacent supply chains including semiconductor wafer fabrication equipment. That shift is driving investment in capacity and skill-building in precision machining and tooling, analysts said. The bank gave buy ratings to Sansera Engineering and Craftsman Automation and neutral ratings to Samvardhana Motherson International and Bharat Forge.

Finally, Morgan Stanley analysts said Qantas Airways’ embarkation on nonstop ultra long-haul flights to Europe and the U.S. should serve as the catalyst for the stock to re-rate. The international business is the most underappreciated part of Qantas’s outlook, with consensus forecasts not fully reflecting the earnings benefit from fleet investments, the bank said. Morgan Stanley lifted its price target 18% to A$12.50. Qantas shares last traded at A$10.09.