General Motors Co. (GM) just handed investors an unpleasant surprise: a $7.1 billion charge tied to its electric vehicle business. This comes on top of a $1.6 billion EV charge the company had previously disclosed, painting a picture of just how expensive it can be to pivot away from an aggressive electrification strategy.

Breaking Down the Damage

The bulk of the pain comes from a $6 billion charge detailed in an SEC filing Thursday. According to GM, more than $4.2 billion of that figure relates to supplier commercial settlements and contract cancellation fees. Translation: GM made commitments when it was bullish on EVs, and breaking those promises doesn't come cheap. The remaining $1.8 billion represents non-cash impairments, the accounting version of admitting certain assets aren't worth what you thought they were.

But wait, there's more. GM warned that additional material cash and non-cash charges are coming in 2026 as the company continues negotiating with suppliers. The silver lining? These future charges should be "significantly less" than what they're eating in 2025.

The automaker also flagged expected impairments to its Emissions Credits portfolio following recent regulatory changes. Still, GM insisted these charges and policy shifts won't affect its vehicle lineup, suggesting customers won't see immediate changes to what's rolling off assembly lines.

Adding to the financial headache, GM expects to record approximately $1.1 billion in additional non-EV related charges for the three months ended December 31, 2025. About $0.5 billion of that will hit as actual cash when paid, stemming from its joint venture with China's state-owned SAIC Motor Corp. Ltd.

Scaling Back While Staying the Course

The massive writedown reflects GM's recent retreat from some of its more ambitious EV plans. The company has ended production of the BrightDrop commercial van and laid off over 3,400 workers from EV-related facilities in Ohio and Michigan. These aren't small adjustments; they're fundamental shifts in manufacturing strategy.

Yet CEO Mary Barra continues to insist that EVs remain GM's "north star," even as the company takes billions in charges to unwind commitments. To back up that claim, GM recently unveiled its most affordable electric offering yet: the Chevrolet Bolt EV priced at $29,000. Whether that message resonates after a $7.1 billion writedown is another question entirely.

Ford's Even Bigger Stumble

GM isn't alone in its EV struggles. Ford Motor Co. (F), GM's fellow Michigan-based automaker, announced last month that it recorded a staggering $19.5 billion charge related to changes in its EV business. That makes GM's writedown look almost modest by comparison.

Gene Munster of Deepwater Asset Management suggested these legacy automaker retreats could actually benefit Tesla Inc. (TSLA), signaling reduced competition in the EV space. Munster also warned that Ford risks falling behind in the autonomous vehicle sector as it pulls back.

Interestingly, Ford hasn't completely abandoned innovation. At CES 2026, the company announced plans for "eyes-off" driving technology, targeting a 2028 rollout for a $30,000 EV built on its Universal EV Platform. So while the financial commitments are shrinking, the technological ambitions haven't entirely disappeared.

What It Means

These massive writedowns tell a story about the challenges facing traditional automakers as they navigate the transition to electric vehicles. Building EVs at scale requires enormous upfront investments in factories, suppliers, and technology. When market conditions shift or demand doesn't materialize as expected, unwinding those commitments gets expensive fast.

For investors watching GM, the question becomes whether this represents a painful but necessary correction, or the beginning of a longer retreat from electrification. The company's mixed messaging doesn't help: taking record charges while simultaneously claiming EVs remain the "north star" is a tough sell.

Price Action: GM shares declined 1.46% to $83.89 during after-hours trading.