General Motors (GM) reported better-than-expected fourth quarter earnings results on Tuesday, driven by strong demand and profit margins for its vehicles in North America. Subheadings for key areas of the earnings report include revenue and profit hits, EV outlook shifts, as well as strike and recession impacts.
GM Overcomes UAW Strike to Post Record Full-Year Profit in 2023
Despite a 40-day United Auto Workers union strike that cost GM an estimated $3.6 billion in earnings in 2023, the Detroit automaker still posted record net income of $10 billion for the full year, according to its earnings report. While Q4 revenue and adjusted earnings were slightly down year-over-year due to the work stoppages, GM still exceeded Wall Street estimates.
“The hard work and dedication of our employees allowed us to continue to build iconic products during a challenging year,” said GM CEO Mary Barra. She highlighted the company’s ability to recover from the lengthy strike and supply chain disruptions to post strong financials.
Key Q4 & Full Year 2023 Financial Results
| Metric | Q4 2023 | Q4 2022 | Full Year 2023 | Full Year 2022 |
|---|---|---|---|---|
| Revenue | $43.1 billion | $43.5 billion | $166.7 billion | $164.4 billion |
| Net Income | $1.9 billion | $1.7 billion | $10.0 billion | $9.9 billion |
| Adjusted EBIT | $3.8 billion | $4.0 billion | $16.0 billion | $15.0 billion |
Despite the headwinds faced, GM still posted total revenue of $166.7 billion in 2023 – its highest on record. Its Q4 revenue represented a slight 0.9% dip from the $43.5 billion during the same quarter in 2022. Net income soared to an all-time high of $10 billion, up 1% from 2022 and exceeding the previous record set in 2021 of $9.9 billion.
Cost Pressures Remain in 2024 But Profit Outlook Improves
While the UAW strike had significant impacts in 2023 that carried over into Q4 results, GM sees tailwinds in 2024 supporting continued growth. “We have a strong franchise, wear a few battle scars from 2023 and are moving full speed ahead into an uncertain macroeconomic environment,” said CFO Paul Jacobson.
The company predicts lower automotive free cash flow generation compared to 2022 and 2023 due to expectations of lower used vehicle prices, higher rental car depreciation, and residual value declines in lease portfolios. However, GM forecasts stronger pricing dynamics to help offset these headwinds and spur higher profitability overall in 2024.
It now expects adjusted automotive free cash flow will come in between $7 billion to $9 billion – improved from a prior outlook between $6 billion to $8 billion. GM also raised its projected 2024 EBIT outlook to a range of $11.5 billion to $13.5 billion, compared to previous guidance between $10.5 billion and $12.5 billion.
“We feel confident in our plan and our ability to manage through the uncertainty ahead,” Barra emphasized.
Investments in EVs Continue But Production Scaling Behind Schedule
GM has made sizable investments in electric vehicle production in recent years, but scaling output has proved difficult. The company previously set targets to manufacture 1 million EVs annually in North America by 2025 powered by its Ultium battery technology. However, on Tuesday’s earnings call, Jacobson admitted “We aren’t moving as fast as we want.”
The launch of the GMC Hummer EV has faced production setbacks at the Factory ZERO plant, while supply chain and logistics snags have hampered the rollout of the BrightDrop EV600 electric van. GM now expects to hit 400,000 to 500,000 EV deliveries per year by mid-decade rather than the 1 million threshold. “We’ve lost a little time but remain confident in reaching our objectives,” Jacobson said.
Barra reaffirmed that despite the delays, GM’s strategy around EVs has not changed – the company is still investing $35 billion through 2025. It believes EVs will be consistently profitable by 2025 as production scales, starting with the Cadillac Lyriq launching this quarter.
Parts Shortages Linger; Recession Risk Looms Large
Raw material and parts shortages stemming from supply chain woes continue to pinch production capacity. GM expects inventories will remain below normal levels for some time until improvements come. “Supply chain uncertainty continues, so we aren’t predicting an easy year,” said Barra during the earnings call.
There are also growing fears of an economic slowdown or recession risk ahead. High inflation and rising interest rates have spooked markets in early 2024. GM sees pockets of pricing softness emerging and a potential industry contraction if broader economic growth stalls – but believes steady job gains and low debt levels among consumers points towards resilience.
“We try to be prepared for whatever comes by responding quickly to changing conditions,” said Barra. “GM has a solid core business and financial strength to weather uncertainty.” She projects strong pricing, high-margin truck sales, and luxury vehicle demand will continue boosting revenues in the year ahead even if total auto sales decline.
GM Stock Pops 10% On Record Profit Outlook in 2024
Shares of GM jumped as much as 10% to new 52-week highs in trading Tuesday following the better-than-expected Q4 earnings results and improved profit guidance for 2024. The stock reaction suggests investors are regaining confidence in GM’s growth trajectory and ability to navigate macroeconomic uncertainty.
Most analysts praised GM’s performance and remain highly bullish on its prospects ahead. “GM is showing more resilience than feared and firming up its footing again after missteps,” said Dan Ives, Managing Director at Wedbush Securities. He contends the automaker will be “firing on all cylinders” in 2024.
Outlook Remains Strong Despite Near-Term Uncertainty
After facing substantial headwinds in 2023, GM is optimistic for better results ahead although risks remain. The year is off to a strong start with higher truck sales, lower expenses, and a chance for the company to correct course on scaling EV manufacturing.
If parts shortages and supply chain issues can improve through 2024 to boost production capacity, it would provide further tailwinds for GM’s revenues. The company also hopes to avoid another UAW strike when its union contract expires in September.
Macroeconomic volatility linked to high inflation, rising rates, geopolitical tensions and recession worries persists. But GM believes its broad lineup of affordable EV and traditional internal combustion engine vehicles leaves them “ready to succeed across scenarios.”
With the progress made in righting the operational ship after a turbulent 2023, GM’s long-term prospects in the rapidly evolving auto market appear reassuring. But investors will be keeping an eye on execution amid EV scaling challenges and economic uncertainty lingering in 2024.
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