In brief: GM expects higher costs for metals, freight and memory chips to cut about $2 billion from its profit this year, and says another $1 billion to $1.5 billion could follow in 2027 if recent increases hold for a full year.
Implications:
Contracts: Metal priced off an index, as at Ford, reaches contracts about a quarter later, so this year’s highs show up in 2027 prices.
Cost talks: GM has not yet found offsets for next year’s increase, so expect harder cost talks around your 2027 quotes.
The News
General Motors expects higher costs for commodities, logistics and memory chips to cut about $2 billion from its 2026 operating profit, CFO Paul Jacobson said on the company’s third-quarter earnings call on Oct 20.
About $1.3 billion of that has already hit this year, including roughly $700 million in the third quarter, mostly from commodities. That puts GM at the top of the $1.5 billion to $2 billion range it gave in July.
Copper is at record prices and hot-rolled steel is at a four-year high. Spot prices for both are up 10% to 15% since July and about 50% above last year’s average, Jacobson said. Commodity and logistics costs “have intensified” as the conflict in the Middle East continued, he added.
Jacobson said it is “too early to try to predict” where commodity prices land in 2027. But if the increase since July ran for a full year, it “would translate into” another $1 billion to $1.5 billion of pressure, for a total of about $2 billion next year.
CEO Mary Barra said the team has not “had time to go work to find the offsets” and promised “significant work in the fixed cost arena.”
Why It Matters
Freight costs hit GM within weeks, while metal reaches buyers through contracts that trail the market, so this year’s increases can keep showing up in 2027.
Freight is fast: Logistics costs show up with “maybe a two-to-four-week lag,” Jacobson said, and were a sizable part of the roughly $400 million GM added to this year’s estimate.
Metal is slow: Ford buys much of its metal on contracts tied to price indexes, which move about a quarter behind the market, CFO Sherry House said in April.
Chips too: GM counts higher prices for DRAM memory chips in the same $2 billion, alongside metals and freight.
Zoom In
Government data show the same rise at the mill, though smaller than the spot moves GM described. US producer prices for copper and brass shapes were 30% higher in September than a year earlier, according to the Bureau of Labor Statistics. Aluminum shapes rose 25%, and iron and steel 21% over the same year.
Buyers of foreign parts pay more on top of that, because imported metals and machinery cost 10% to 25% more than a year ago even before tariffs.
Who’s Exposed
Parts suppliers on fixed prices: Suppliers whose automaker contracts do not pass metal costs through carry this year’s increase until they reprice.
Copper-heavy parts: Wiring, motors and electrical parts carry the most copper, the metal that rose the most in a year.
Importers of parts: Buyers of foreign parts pay the higher metal prices plus duties, on top of the freight costs that move within weeks.
Peer Insights
GM has already changed how some suppliers hold parts. It will guarantee up to $4.5 billion of bank money so some suppliers can buy parts early and hold them until GM needs them. GM is also spending $1 billion to $1.5 billion this year to move production to the US, strengthen its supply chain and expand its software, work CEO Barra said began after the chip shortage.
