GM Surpasses Q4 Sales, Boosts Profits; Acknowledges EV Pace Challenges

 

GM (GM) reported better fourth-quarter sales and profits and on Tuesday issued full-year 2024 profit guidance that matched its original 2023 forecast.

The upbeat earnings report comes as GM tries to shake off the impact of the UAW strike and refocus its electric vehicle rollout, which the company acknowledged has “created some uncertainty.”

Shares of the automaker rose over 7% in premarket trading following the release of the financial update.

For the quarter, GM reported total revenue of $42.98 billion, beating the Bloomberg consensus estimate of $39.53 billion, although that figure compares to the $43.1 billion the company reported in the quarter reported in the fourth quarter of 2022, was lower. As for profitability, GM reported adjusted earnings per share of $1.24 versus estimates of $1.16 on adjusted EBIT (earnings before interest and taxes) of $1.757 billion, although this figure compares fell by 53.8% compared to the previous year.

For the year, GM earned $12.4 billion in adjusted EBIT; in late November GM reinstated its full-year outlook, expecting adjusted EBIT of $11.7 billion to $12.7 billion, compared with its previous outlook of $12 billion to $14 billion.

And it was last year’s original range of $12 billion to $14 billion that GM now sees as its full-year 2024 adjusted EBIT guidance. The company also expects adjusted earnings per share of $8.50 to $9.50 for the year.

“There is growing consensus that the U.S. economy, labor market and auto sales will continue to be resilient, and at GM we expect healthy industry sales of approximately 16 million units with the electric vehicle mix continuing to grow,” said Mary, CEO and chairman of GM, Barra said in her letter to shareholders.

 

EV growth

When it comes to EV sales, GM suffered some setbacks in 2023 due to its once-aggressive rollout, and some slowdown is expected this year. In fact, a company spokesperson said GM will have $1.7 billion in reserves in the fourth quarter for losses related to its existing inventory of electric vehicles.

“It is true that the pace of electric vehicle growth has slowed, which has created some uncertainty,” Barra said, although based on our current expectations for electric vehicle demand and production growth, she expects GM to post a “positive one” in the second half of the year “variable profit” will be achieved.

 

GM Chief Financial Officer Paul Jacobson also reiterated the company’s goal of increasing the profitability of electric vehicles in a roundtable with reporters. “We will not reduce profitability [EBIT EV margin] too much to single digits until 2025,” he said.

GM, which abandoned its goal of building 400,000 EVs through mid-2024, did not say whether it still expects to have 1 million units of EV capacity by 2025.

GMC for Sale at Chuck Nash, San Marcos, Jan. 3, 2024

 

In addition to reaffirming its earnings outlook last November, GM announced a $10 billion “accelerated share repurchase” (ASR) program that will increase its common stock dividend by 33% starting in January. Unlike a traditional, phased share buyback, GM said the program will begin immediately.

“Everyone on the team is focused on strong execution to maintain our momentum and create value for shareholders, and we are deeply committed and responsible for doing just that,” Barra said in her letter.

 

Effects of strikes

Despite the UAW work stoppage, GM’s fourth-quarter sales were not dramatically affected as the company said it had built sufficient inventory in anticipation of a strike. In early January, GM reported a 0.3% increase in fourth-quarter U.S. sales compared to the same period last year, with about 625,176 cars and trucks sold.

Overall, GM said sales rose 14.1% to 2.6 million vehicles in 2023, marking the company’s best year since 2019. The automaker also increased its overall market share by 0.3% to 16.3% in the US. GM said it was No. 1 in full-size pickup truck sales in the U.S. (841,000 units) and No. 1 in full-size SUV sales (245,000 units).

GM also predicted that total U.S. auto industry sales will reach 16 million in 2024, which would mark a significant improvement post-pandemic; Only 13.4 million vehicles were sold in 2022, the lowest level in a decade.

However, things are different for GM abroad. Jacobson said GM expects to post a first-quarter loss in China. “We’re going to have a tough first quarter there,” he said.

Another hiccup for GM involved issues related to its Cruise AV business unit. In November, Cruise paused all autonomous activities across the country with its robotaxis after an accident where a Cruise robotaxi ran over a woman, stopped on top of her, and then dragged her for about 20 feet before pulling over. The woman suffered severe injuries from the accident. A few weeks later Kyle Vogt, CEO of GM’s Cruise autonomous driving division, announced he was resigning from his role and leaving the company.

Late last week, Cruise revealed it was under investigation by the Department of Justice and SEC, among other regulatory bodies, concerning the incident with the pedestrian who was dragged and Cruise’s actions in the immediate aftermath of the event.

 

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