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    General Motors Co (GM)

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    General Motors Company (GM) designs, builds, and sells trucks, crossovers, cars, and automobile parts, and provides software-enabled services and subscriptions worldwide . The company operates through segments such as GM North America (GMNA) and GM International (GMI), marketing vehicles under brands like Buick, Cadillac, Chevrolet, and GMC . GM is also investing in electric vehicles (EVs) and autonomous vehicles (AVs), with a focus on expanding their EV portfolio through their Ultium architecture . Additionally, GM offers automotive financing services through its GM Financial segment, contributing significantly to its revenue and profitability .

    1. GM North America (GMNA) - Designs, builds, and sells vehicles under the Buick, Cadillac, Chevrolet, and GMC brands in North America.
    2. GM International (GMI) - Markets vehicles under the Buick, Cadillac, Chevrolet, Baojun, and Wuling brands in international markets, primarily in China.
    3. GM Financial - Provides automotive financing services, significantly contributing to GM's revenue and profitability.
    4. Electric Vehicles (EVs) - Invests in and expands the EV portfolio using the Ultium architecture, aiming for a significant increase in production capacity.
    5. Cruise - Develops and commercializes autonomous vehicle technology.
    Initial Price$46.52July 1, 2024
    Final Price$44.88October 1, 2024
    Price Change$-1.64
    % Change-3.53%

    What went well

    • GM Financial's credit performance remains strong, with net charge-offs at 1.2%, remaining within expectations, and the portfolio being heavily prime, performing well due to good employment levels and household income. GM Financial aims to increase penetration levels to the target range of 40% to 45%.
    • GM is experiencing increased EV demand and expects meaningful savings in EV profitability next year, supported by strategic initiatives like access to the Tesla Supercharger network and vehicles offering over 300 miles of range. They anticipate achieving $2 billion to $4 billion in lower EV losses in 2025.
    • GM has strong pricing power, with a $900 million pricing benefit driven by the strong performance of midsize SUVs like the Chevrolet Traverse and effective pricing adjustments on full-size SUVs and the Corvette. Upcoming SUV refreshes are expected to continue this pricing strength, with new full-size SUV refreshes planned for release later this year or early next year.

    What went wrong

    • Significant increase in warranty costs: GM faced a $700 million year-over-year adjustment in the third quarter due to warranty claims on high-volume vehicles, indicating potential quality issues and leading to increased expenses.
    • Pricing pressures and potential normalization: The company's ability to sustain high pricing levels may be challenged as previous price increases are fully lapped, and there may be lower expected pricing due to seasonal industry incentives, which can impact margins.
    • Uncertainty in EV profitability amidst market conditions: GM's plan to reduce EV losses by $2 billion to $4 billion next year depends on EV sales growth. If EV sales are flat or down, the scale benefits and profitability improvements may not materialize, posing a risk to the company's EV strategy.

    Q&A Summary

    1. 2025 Outlook and EV Loss Reduction
      Q: Will core business EBIT decline despite $2–4B EV loss improvement?
      A: Management anticipates the core business to remain resilient in 2025. While expecting a $2–4 billion improvement in EV losses, they project total EBIT to be similar to 2024 levels due to factors like labor cost inflation and conservative pricing assumptions. They're committed to driving results despite market changes.

    2. Free Cash Flow and Share Repurchases
      Q: Can strong free cash flow continue next year, and what's the buyback plan?
      A: This year's free cash flow benefited from cash-deferred costs like warranty accruals. Management aims to maintain strong free cash flow but notes some benefits may not repeat next year. They reaffirm their commitment to reducing share count to 1 billion shares in early 2025, indicating continued capital returns to shareholders.

    3. Pricing Resilience
      Q: How is GM sustaining strong pricing amid industry normalization?
      A: GM attributes its pricing resilience to a strong product portfolio and disciplined incentive spending. They've benefited from prior price increases and expect some stabilization as they lap last year's increases. Upcoming refreshed SUVs are expected to support pricing, and incentives remain below industry average.

    4. CapEx Allocation
      Q: How is CapEx mix shifting among EV, ICE, and other investments?
      A: CapEx remains stable at around $11 billion, balancing investments between EVs and ICE vehicles. After significant infrastructure investments, GM now focuses more on product development and efficiency gains, including technology enhancements and cost reductions. Approximately one-third of program capital is allocated to ICE.

    5. China Business Strategy
      Q: How committed is GM to China amid ongoing losses?
      A: GM is focused on turning around losses in China by collaborating with partners to achieve a sustainable and profitable business. They highlight successes like the new GLA product and a shift toward new energy vehicles. GM plans to participate differently in the market, leveraging strengths and capital-light strategies like premium imports.

    6. EV Loss Reduction with Flat Sales
      Q: Can GM reduce EV losses by $2–4B even if EV sales are flat?
      A: Management believes meaningful EV profitability improvements are achievable through efficiency gains, cost reductions, and mix benefits from new models like the Cadillac Escalade IQ. While scale is important, improvements aren't solely dependent on sales growth. They emphasize discipline in scaling to demand and ongoing cost efficiencies.

    7. Cruise Capitalization
      Q: What's motivating GM to raise capital for Cruise?
      A: GM seeks to invest in autonomy efficiently and is exploring partnerships to manage investments wisely. They aim to leverage opportunities to be more capital-efficient, potentially involving strategic partners, though specifics aren't disclosed.

    8. Q4 EBIT Decline Factors
      Q: What are the main factors behind expected Q4 EBIT decline?
      A: The anticipated $1.5 billion decline in adjusted EBIT for Q4 is due to factors like eight fewer production days, a $400 million pull-forward of production into Q3, and lapping prior year price increases. Management notes these are timing-related and not indicative of future performance.

    9. R&D Budget Allocation
      Q: How is the R&D budget shifting between EVs and ICE?
      A: GM maintains a balanced R&D budget, investing in both EV and ICE development. While they've launched several EVs, ongoing work includes efficiency improvements and cost reductions. The R&D run rate is expected to continue, supporting portfolio enhancements and technological advancements.

    10. Equinox EV Profitability
      Q: Can strong sales of entry-level Equinox EV support profit goals?
      A: GM is monitoring customer demand across its EV portfolio, including the $35,000 Equinox EV. They're confident in meeting profit improvement targets by responding to customer preferences and leveraging additional options to drive growth and profitability.

    Guidance Changes

    Annual guidance for FY 2024:

    • EBIT Adjusted: $14B to $15B (raised from $13B to $15B )
    • EPS Diluted Adjusted: $10 to $10.50 (raised from $9.50 to $10.50 )
    • Adjusted Automotive Free Cash Flow: $12.5B to $13.5B (raised from $9.5B to $11.5B )
    • EV Production and Wholesale: Approximately 200,000 EVs in North America in 2024 (no prior guidance)

    Annual guidance for FY 2025:

    • Share Repurchase Program: Reduce outstanding shares to less than 1 billion in early 2025 (no prior guidance)
    NamePositionStart DateShort Bio
    Michael AbbottExecutive Vice President, Software2023Michael Abbott served as the Executive Vice President, Software at General Motors starting in 2023. Before joining GM, he was the Vice President of Engineering in the Cloud Services Division at Apple from 2018 .
    Mary T. BarraChair and Chief Executive Officer2014Mary T. Barra is the Chair and Chief Executive Officer of General Motors Company. She has served as Chair of the Board of Directors since January 2016 and as CEO since January 2014. She began her career with GM in 1980 .
    Julian BlissettExecutive Vice President and President, GM China2020Julian Blissett is the Executive Vice President and President, GM China, a position he has held since 2020. Prior to this role, he served as Senior Vice President, International Operations in 2019 .
    Craig B. GliddenExecutive Vice President, Legal, Policy, Cybersecurity, and Corporate Secretary2021Craig B. Glidden is the Executive Vice President, Legal, Policy, Cybersecurity, and Corporate Secretary at General Motors. He has been serving in this position since 2021. He was previously the Executive Vice President and General Counsel starting in 2015 .
    Rory V. HarveyExecutive Vice President and President, Global Markets2024Rory V. Harvey is the Executive Vice President and President, Global Markets at General Motors, a position he has held since 2024. Prior to this role, he served as the Executive Vice President and President, North America in 2023 .
    Christopher T. HattoVice President, Global Business Solutions and Chief Accounting Officer2020Christopher T. Hatto is the Vice President, Global Business Solutions and Chief Accounting Officer at General Motors. He has held this position since 2020. Previously, he was Vice President, Controller and Chief Accounting Officer starting in 2018 .
    Paul A. JacobsonExecutive Vice President and Chief Financial Officer2020Paul A. Jacobson is the Executive Vice President and Chief Financial Officer at General Motors. He has been serving in this role since 2020. Prior to joining GM, he was the Executive Vice President and Chief Financial Officer at Delta Air Lines from 2013 .
    Gerald JohnsonExecutive Vice President, Global Manufacturing and Sustainability2019Gerald Johnson is the Executive Vice President, Global Manufacturing and Sustainability at General Motors. He has held this position since 2019. Previously, he was Vice President, North America Manufacturing and Labor Relations starting in 2017 .
    Mark L. ReussPresident2019Mark L. Reuss is the President of General Motors, a position he has held since 2019. Prior to becoming President, he served as Executive Vice President and President of the Global Product Development Group and Cadillac in 2018 .
    Grant DixtonExecutive Vice President and Chief Legal and Public Policy Officer2024Grant Dixton serves as the Executive Vice President and Chief Legal and Policy Officer at General Motors. He was appointed to this position effective July 15, 2024 .
    Craig GliddenExecutive Vice President and Strategic Advisor; President and Chief Administrative Officer of GM Cruise Holdings LLC2023Craig B. Glidden was appointed as Co-President and Chief Administrative Officer of Cruise, GM's majority-owned autonomous vehicle subsidiary, in December 2023 .
    1. Given the headwinds in China and the competitive environment, how specifically do you plan to make your Chinese joint ventures sustainable and profitable, and what restructuring actions are you considering?
    2. With the EV market becoming increasingly competitive, and considering your goal to make EVs profitable on an EBIT basis quickly, what are the main obstacles you foresee in achieving this, and how do you plan to overcome them?
    3. Can you elaborate on the rationale behind seeking external funding for Cruise when GM has sufficient capital, and how will this impact your control over Cruise's strategic direction?
    4. As you expect 2025 results to be in a similar range to 2024, can you provide more detail on the specific tailwinds and headwinds, such as the impact of cost inflation and pricing pressures, that underpin this outlook?
    5. With the anticipated decrease in adjusted EBIT in Q4 compared to Q3, can you break down the major factors contributing to this decline, and how do you plan to mitigate similar impacts in the future?
    Program DetailsProgram 1Program 2
    Approval DateNovember 2023 June 2024
    End Date/DurationN/AN/A
    Total Additional Amount$10.0 billion $6.0 billion
    Remaining Authorization$5.0 billion $5.0 billion
    DetailsAggregate of $11.4 billion No expiration date

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024 and FY 2025
    • Guidance:
      1. EBIT Adjusted: $14 billion to $15 billion for FY 2024 .
      2. EPS Diluted Adjusted: $10 to $10.50 per share for FY 2024 .
      3. Adjusted Automotive Free Cash Flow: $12.5 billion to $13.5 billion for FY 2024 .
      4. EV Production and Wholesale: Approximately 200,000 EVs in North America in 2024 .
      5. Share Repurchase Program: Reduce outstanding shares to less than 1 billion in early 2025 .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024
    • Guidance:
      1. EBIT Adjusted: $13 billion to $15 billion .
      2. EPS Diluted Adjusted: $9.50 to $10.50 per share .
      3. Adjusted Automotive Free Cash Flow: $9.5 billion to $11.5 billion .
      4. GM Financial EBT Adjusted: $2.75 billion to $3 billion .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: FY 2024
    • Guidance:
      1. EBIT Adjusted: $12.5 billion to $14.5 billion .
      2. EPS Diluted Adjusted: $9 to $10 .
      3. Adjusted Automotive Free Cash Flow: $8.5 billion to $10.5 billion .
      4. EV Production and Wholesale Volume: 200,000 to 300,000 units .
      5. Cruise Expenses: Around $1.7 billion .
      6. EV Variable Profit: Positive in the second half of the year .
      7. Pricing Assumption: 2% to 2.5% negative impact .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024
    • Guidance:
      1. EBIT Adjusted: $12 billion to $14 billion .
      2. EPS Diluted Adjusted: $8.50 to $9.50, with specific adjustments .
      3. Adjusted Automotive Free Cash Flow: $8 billion to $10 billion .
      4. GM Financial EBT Adjusted: $2.5 billion to $3 billion .
      5. Effective Tax Rate: 18% to 20% .
      6. Weighted Average Fully Diluted Share Count: Below 1.15 billion shares .
      7. Capital Spending: $10.5 billion to $11.5 billion .
      8. North America Margins: 8% to 10% .
      9. Cruise Expenses: $1 billion lower than previous year .
      10. Pricing Headwind: 2% to 2.5% .
      11. Higher Labor Costs: $1.3 billion .
      12. Ultium-based EV Production: 200,000 to 300,000 units .

    Recent developments and announcements about GM.

    Financial Actions

      Dividend Policy

      ·
      Nov 29, 2023, 12:00 AM

      General Motors (GM) Announces Dividend Increase

      On November 29, 2023, General Motors Co. (NYSE: GM) announced a significant change in its dividend policy. The company plans to increase its common stock dividend by 33%, starting with the January 2024 declaration. This increase will raise the quarterly dividend by $0.03 per share, beginning in the first quarter of 2024 .

      Additionally, GM has announced a $10 billion accelerated share repurchase (ASR) program, which will commence immediately. The ASR program is expected to conclude in the fourth quarter of 2024 .

      **Key Details: **

      • Dividend Increase: 33% increase in common stock dividend starting January 2024.
      • Quarterly Dividend: Increase by $0.03 per share, beginning in Q1 2024.
      • ASR Program: $10 billion accelerated share repurchase program to be executed by Bank of America, Goldman Sachs, Barclays, and Citibank .

      For more information, you can visit GM's official website .

    Financial Reporting

      Auditor Changes

      ·
      Sep 29, 2017, 12:00 AM

      General Motors (GM) Auditor Change: On September 25, 2017, GM's Audit Committee approved the engagement of Ernst & Young LLP (EY) as the new independent registered public accounting firm for the fiscal year ending December 31, 2018. Deloitte & Touche LLP will continue as the auditor for the fiscal year ending December 31, 2017. This change followed a competitive selection process .