General Motors experienced a 12% increase in net income last year, showcasing the resilience of General Motors in the face of challenges. Despite enduring a six-week autoworkers’ strike that led to plant shutdowns and a loss exceeding $1 billion, General Motors demonstrated robust financial performance. The Detroit-based automaker, General Motors, reported a net income of just over $10 billion, a notable rise from the $8.9 billion recorded in 2022.
Notably, General Motors’ earnings-per-share, excluding one-time items, reached $7.68, surpassing the Wall Street projection of $7.57, as reported by FactSet. Full-year revenue for General Motors soared to $171.84 billion, marking a commendable 10% increase compared to the previous year and outpacing estimates that predicted $167.26 billion.
In the current economic landscape, where the automotive industry faces disruptions, General Motors anticipates further challenges, particularly in light of increased discounts leading to lower vehicle selling prices. Despite this, General Motors is cautiously optimistic about a modest improvement in earnings for the ongoing year. General Motors’ outlook for 2024 includes an expected net income ranging from $9.8 billion to $11.2 billion, coupled with adjusted earnings per share projected to fall within the range of $8.50 to $9.50, an uptick from the $7.68 reported in the prior year.
The positive financial performance is underscored by North American pretax profits of $12.3 billion, leading to profit-sharing checks of $12,250 for approximately 45,000 United Auto Workers members. This reflects General Motors’ commitment to sharing the gains with its workforce.
However, General Motors faces headwinds in the form of a projected 2% to 2.5% average sales price drop on vehicles in 2024, primarily driven by an expanding inventory amid high interest rates. Despite these challenges, General Motors Chief Financial Officer Paul Jacobson notes that average sale prices are holding up well, remaining similar to the end of 2023.
A notable strategy shift for General Motors is the decision to reintroduce plug-in gas-electric hybrids in the U.S. market, deviating from its earlier emphasis on electric vehicles. General Motors CEO Mary Barra shared insights into the rationale behind this move, citing the efficiency of leveraging technology already in production in other markets. The decision aligns with General Motors’ strategy to comply with more stringent fuel economy requirements set to take effect in the U.S. from 2027.
Barra emphasized General Motors’ overarching commitment to eliminating tailpipe emissions from light-duty vehicles by 2035. Despite this long-term vision, General Motors recognizes the need for interim measures, including the deployment of plug-in technology in specific segments. Barra highlighted the environmental benefits of plug-in hybrids as the nation continues to build its charging infrastructure.
The reintroduction of plug-in hybrids received mixed reactions, with some analysts, such as Michelle Krebs, executive analyst for Cox Automotive, expressing disagreement with General Motors’ previous decision to halt hybrid sales in the U.S. Krebs emphasized the challenges that electric vehicles pose for consumers, requiring significant changes in driving habits. Hybrids, according to Krebs, offer a familiar refueling experience at gas stations, instilling confidence in consumers about covering longer distances without charging concerns.
Despite the reintroduction of hybrids, General Motors remains steadfast in its commitment to electric vehicles. Jacobson affirmed strong demand for General Motors’ current EV products, expecting losses to ease in the coming year. The company aims to achieve low-to-mid single-digit profit margins for its electric vehicles by 2025, driven by the addition of more EV models to its lineup.
General Motors’ plans for the current year include selling 200,000 to 300,000 electric vehicles in North America, with an adaptive approach based on market demand. General Motors remains attuned to the evolving landscape, acknowledging the slowed pace of electric vehicle growth and uncertainties in the market. Jacobson emphasized that General Motors will build to meet demand, ensuring a flexible approach in response to market dynamics.
In addition to navigating shifts in product strategy, General Motors has implemented cost-cutting measures, saving approximately $1 billion last year by simplifying engineering and manufacturing processes. The company anticipates additional savings of $1 billion in the ongoing year.
Reflecting on the challenges of the previous year, General Motors faced a $1.1 billion loss due to the UAW strike, an $800 million cost associated with a Chevrolet Bolt EV battery recall, and a $1.7 billion accounting charge related to the valuation of its electric vehicle inventory. Notably, these specific expenses are not expected to recur in 2024, contributing to a more stable financial outlook.
Looking ahead, General Motors expects to spend $1 billion less on its Cruise autonomous vehicle unit, acknowledging a slowing rollout of self-driving robotaxis. The company experienced a significant loss of $2.7 billion before taxes from the Cruise unit in the previous year.
Despite headwinds such as higher labor costs and potential hits due to lower prices, General Motors remains focused on strategic adaptation. In the fourth quarter alone, General Motors reported a profit of $2.08 billion, a 4.5% increase from the previous year, surpassing analysts’ estimates by 8 cents per share.
In conclusion, General Motors’ financial performance in the face of challenges showcases its resilience and strategic adaptability. The reintroduction of plug-in hybrids signals a nuanced approach to the evolving automotive landscape, balancing the demand for electric vehicles with consumer preferences for familiar driving experiences. As General Motors navigates uncertainties in the market, the company’s commitment to financial stability and flexibility positions it for continued success in a dynamic industry.