General Motors Company — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Amounts are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Business context
GM designs, manufactures and sells vehicles and parts, develops software-enabled services and autonomous-vehicle technology, and provides financing through GM Financial. Its reportable segments are GM North America (GMNA), GM International (GMI), Cruise and GM Financial.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Net sales and revenue | $44.1B | $41.9B | $128.9B | $113.6B |
| Operating income | $3.0B | $3.4B | $8.4B | $7.7B |
| Net income attributable to common stockholders | $3.0B | $3.3B | $7.9B | $6.9B |
| Diluted GAAP EPS | $2.20 | $2.25 | $5.72 | $4.73 |
| EBIT-adjusted | $3.6B | $4.3B | $10.6B | $10.7B |
- Q3 revenue increased 5.4% year over year, while operating income fell about 11% and diluted GAAP EPS declined about 2%. Nine-month revenue rose 13.4%; operating income increased 8.8%.
- Q3 EBIT-adjusted was $3.6B; adjusted diluted EPS was $2.28, versus $2.25 a year earlier. Nine-month adjusted diluted EPS was $6.40 versus $5.48.
- Automotive EBIT-adjusted margin was 9.8% in Q3 versus 11.2% a year earlier, and 9.7% for the nine months versus 10.0%. GMNA Q3 adjusted EBIT fell to $3.5B from $3.9B. GM Financial adjusted EBT declined to $741M from $911M in Q3 and to $2.3B from $3.3B for the nine months.
- Cash and cash equivalents were $25.2B and marketable debt securities were $9.7B at September 30. Automotive available liquidity was $42.5B, including $13.5B available under credit facilities. GM Financial reported $28.7B available liquidity.
- For the nine months, consolidated operating cash flow was $17.3B, investing cash flow was negative $12.1B and financing cash flow was positive $1.8B. Automotive operating cash flow was $16.1B and capital expenditures were $7.1B.
- Automotive debt was $16.4B and GM Financial debt was $102.5B at September 30. GM Financial debt primarily supports its finance and leasing portfolio; much of its secured debt is repayable from pledged assets.
- Total assets were $281.7B and total equity was $78.4B. Automotive receivables and inventories increased from year-end 2022; inventories were $17.7B versus $15.4B.
Material changes versus comparable periods
- Revenue growth reflected higher automotive wholesale volume and pricing, as well as increased GM Financial revenue. U.S. nine-month market share increased to 16.4% from 15.7%; China share declined to 8.6% from 10.1%.
- Automotive costs, including warranty and recall-related costs, EV expenses, materials and manufacturing, weighed on profitability. Nine-month warranty expense, net of recoveries, rose to $3.85B from $1.80B.
- GM Financial revenue grew, partly from higher finance yields and a larger receivables portfolio, but increased funding costs and lower lease termination gains reduced earnings. Its effective rate of interest paid rose to 4.5% for the nine months from 2.8%.
- GM returned capital through $1.1B of common-share repurchases and $373M of common dividends in the nine months.
- Automotive China joint-venture equity income decreased to $353M for the nine months from $477M, alongside lower China JV sales and net income.
Outlook, commentary, risks and unusual items
- Labor and guidance: The UAW strike began September 15, 2023, affecting production and parts distribution. GM estimated an approximately $0.2B Q3 adjusted EBIT impact and a further $0.6B through October 24; the estimated ongoing impact was $0.4B per week. GM suspended its 2023 guidance because of uncertainty over negotiations and work stoppages.
- Management outlook: Before the guidance suspension, GM said it expected relatively strong 2023 GMNA adjusted margins, supported by pricing, U.S. demand and cost actions, with risks from costs, supply and production disruption. Its announced cost-reduction program targets $2B in annual fixed-cost reductions by 2024, with a further $1B of reductions intended to offset higher depreciation and amortization.
- Cruise: Cruise reported a $732M Q3 adjusted EBIT loss and a $1.9B nine-month loss. After quarter-end, NHTSA opened an investigation and California suspended Cruise’s driverless-operation permits following a pedestrian accident. These matters could affect Cruise’s operations and commercialization plans.
- Recall and warranty: GM recorded a $792M charge in Q2 2023 after settling with LG over reimbursement for Chevrolet Bolt recall costs. The filing says actual recall costs could be materially higher or lower. The net warranty liability was $8.6B at September 30.
- Other contingencies: GM accrued $139M in Q3 for potential adjustments to greenhouse-gas credits; total expense for the matter was $450M through September 30, and further loss could be material. Estimated reasonably possible indirect-tax losses above accruals were up to approximately $1.8B. The filing also describes litigation, airbag and product-liability risks, including matters for which potential losses cannot be estimated.
- Other items: Nine-month restructuring charges included $905M for a voluntary separation program and $438M for Buick dealer strategy. GM said a $1.0B Korean deferred-tax valuation allowance could potentially be reversed, producing a significant Q4 earnings benefit if its assessment changes.
- Management cited higher interest rates, inflation, competitive and regulatory pressure, foreign-exchange volatility, supply-chain risks, China market challenges and possible further restructuring. It said current liquidity was sufficient for expected requirements and that it remained in compliance with credit-facility covenants.
Important facts for investors to verify
- Subsequent filings and company updates on the UAW agreement, strike duration, production losses and any revised guidance.
- Progress and regulatory outcomes for Cruise, including the California permit suspension and NHTSA investigation.
- Warranty and recall accrual developments, supplier recoveries, the Bolt settlement and the possible scope and cost of ARC airbag-related recalls.
- GM Financial credit performance, loan-loss provisions, funding costs, lease residual values and available liquidity.
- Whether the targeted cost reductions are achieved and whether Korean deferred-tax valuation allowances are reversed.
- Potential outcomes and cash requirements for greenhouse-gas credits, indirect-tax matters and other material litigation or contingencies.