General Motors Records Annual Profit Growth And Is Optimistic For The Financial Future; Stocks Soar
30 Janeiro 2024 - 12:22PM
IH Market News
General Motors (NYSE:GM) announced a 5.2% increase in its
fourth-quarter net income, reaching $2.1 billion compared to the
previous year. During the period from October to December, the
North American car manufacturer recorded revenues of US$42.9
billion, a slight reduction of 0.3% compared to the same quarter in
2022.
Mary Barra, CEO of GM, expressed confidence in the company’s
position to achieve solid financial performance next year, building
on the successes and learnings of 2023.
In annual terms, GM saw its profit rise to US$10.1 billion,
marking a growth of 1.9% over 2022. The company’s revenues also
showed a significant increase of 9.6% throughout the year, totaling
US$ $171.8 billion.
Shares jumped on Tuesday after the company gave investors an
optimistic outlook for 2024 and signaled that more capital will be
returned to shareholders.
“Consensus is growing that the U.S. economy, job market and auto
sales will continue to be resilient,” GM Chief Executive Mary Barra
told investors in a letter. GM expects to reduce outstanding shares
to less than 1 billion, down from about 1.2 billion currently and
1.6 billion at its post-IPO peak, Barra said.
GM shares rose 8.7% in early trading.
Barra highlighted measures to return cash to shareholders,
including $12 billion in 2023 through a $10 billion share buyback
and a 33% dividend increase.
“We are prioritizing the return of money to our shareholders,”
said Barra. GM’s forecast for 2024 calls for $8 billion to $10
billion in free cash flow, almost all of it generated by GM’s
internal combustion engine, or ICE, vehicles.
“The ICE machine is working again… please go to the end of the
hall and fill your buckets!” Evercore ISI analyst Chris McNally
wrote in a note.
GM is pinning hopes on strong demand for its combustion trucks
and SUVs in North America, cost savings and increased sales of its
new generation of electric vehicles after 2023 deliveries fell
short of previous plans. GM expects overall EV sales to increase
this year to 10% of the U.S. market from 7% in 2023.
However, Barra said GM will launch plug-in hybrid vehicles in
North America, moving away from the strategy of bypassing hybrid
engines in that market. U.S. sales of hybrids have been rising as
consumers balk at high electric vehicle prices and charging
infrastructure challenges.
“We know the EV market is not going to grow linearly,” CFO Paul
Jacobson told analysts. “We are prepared to make ICE and EV
production more flexible.”
CRUISE DRIVE, CHINA POSE CHALLENGES
Analysts questioned Barra about possible changes to GM’s
electric and autonomous vehicle strategies, as well as declining
sales in China.
“We will not shy away from making difficult decisions” to protect
profitability, Barra said. “Nothing is off the table.”
GM will postpone a planned March investor day until later this
year “because of the significant changes underway at GM and
Cruise,” Barra said. GM also wants more time to resolve software
development issues that forced the company to stop selling its new
Chevrolet Blazer EV.
GM expects its electric vehicle operations to begin generating
variable profits in the second half of the year, Jacobson said.
Adjusted pre-tax profits for 2024 are forecast at $12 billion to
$14 billion, compared with $12.4 billion reported for 2023. GM will
keep capital spending roughly flat.
The 2024 forecast translates to somewhere between $8.50 and
$9.50 per share, compared to $7.68 in 2023. Fewer shares due to
buybacks add $1.45 per share to the forecast. This will be offset
by higher taxes and interest payments.
Cost reduction will play an important role in meeting forecasts
as GM expects vehicle prices to fall. GM plans to cut $400 million
in marketing spending, on top of last year’s $500 million cut,
Jacobson said. Engineers cut $200 million in product development
costs, Barra said.
In the fourth quarter, GM reported that net income rose 5.2% to
$2.1 billion on revenue of $43 billion. Adjusted pre-tax profit
fell 54% to $1.8 billion. The reduction reflected the impact of
last fall’s United Auto Workers strikes, higher costs at Cruise and
a $1.1 billion writedown related to electric vehicle battery cells
held in inventory, the company said.
Spending on the troubled Cruise robo-taxi unit will be cut by $1
billion. Cruise halted operations after one of
its self-driving cars dragged a woman down a San Francisco
street.
Barra said GM will “refocus and relaunch Cruise,” without
disclosing a timeline. Cruise lost $2.7 billion in 2023, not
including $500 million in restructuring costs incurred in the
fourth quarter when the unit cut staff.
Separately, GM faces increasing challenges in China, once its
biggest market. Domestic automakers and Tesla are gaining share
with electrified vehicles, new infotainment technologies and
aggressive price cuts. GM expects to post a loss in China in the
current quarter, Jacobson said.
“We have a lot of inventory that we are working through in the
first quarter” in China, he said.
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