General Motors Company — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed February 10, 2021. GM designs, manufactures and sells vehicles and parts, operates autonomous-vehicle developer Cruise, and provides automotive financing through GM Financial. European operations sold in 2017 are reported as discontinued operations; the figures below are for continuing operations unless noted.
Financial performance
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Total net sales and revenue | $122.5 billion | $137.2 billion | Down 10.7% |
| Operating income | $6.6 billion | $5.5 billion | Up $1.2 billion; operating margin approximately 5.4% versus 4.0% |
| Net income attributable to stockholders | $6.4 billion | $6.7 billion | Down 4.5% |
| Diluted EPS | $4.33 | $4.57 | Adjusted diluted EPS was $4.90 versus $4.82 |
| EBIT-adjusted | $9.7 billion | $8.4 billion | Up $1.3 billion; non-GAAP measure |
| Net cash from operating activities | $16.7 billion | $15.0 billion | Consolidated; includes financing operations |
| Automotive operating cash flow | $7.5 billion | $7.4 billion | Automotive capital expenditures were $5.3 billion versus $7.5 billion |
- Segments: GMNA revenue was $96.7 billion and adjusted EBIT was $9.1 billion, with a 9.4% adjusted margin (7.7% in 2019). GMI revenue fell 28.1% to $11.6 billion and adjusted EBIT loss widened to $528 million. GM Financial adjusted EBT rose 28.4% to $2.7 billion despite revenue falling 5.0% to $13.8 billion. Cruise recorded an adjusted EBIT loss of $887 million, versus $1.0 billion.
- Vehicle sales: Wholesale sales declined 19.9% to 3.37 million. U.S. market share rose to 17.1% from 16.5%; China share fell to 11.6% from 12.2%. Automotive China JV equity income dropped to $512 million from $1.1 billion.
- Liquidity and debt: At year-end, consolidated cash and cash equivalents were $20.0 billion and marketable debt securities were $9.0 billion. Automotive and Cruise available liquidity, including credit facilities, was $42.2 billion; GM Financial separately reported available liquidity of $26.6 billion. Automotive debt was $17.5 billion and GM Financial debt was $92.4 billion. GM repaid its 2020 revolver borrowings by year-end.
- Margins and costs: Revenue declined sharply, but operating income increased as cost of sales and SG&A fell. GM reported $1.1 billion of Takata-related recall expense in the fourth quarter, contributing to higher recall costs.
Material changes and unusual items
- COVID-19 caused manufacturing suspensions beginning in March 2020; operations had resumed globally by May, with normalized production reached in June. GM suspended its common-stock dividend, reduced spending and deferred some projects; the dividend remained suspended during 2020. Common dividends paid fell to $545 million from $2.2 billion.
- GM recorded $683 million of GMI restructuring charges, principally related to exiting or reducing operations in Australia, New Zealand, Thailand and India, plus $236 million of related deferred-tax expense. The actions included winding down Holden and selling or planning to sell facilities.
- GM accrued $1.1 billion in Q4 for the required Takata passenger-side inflator recall affecting certain full-size trucks and SUVs. The recall is expected to take several years. Total product warranty and related liabilities were $8.2 billion at year-end.
- GM Financial’s loan-loss provision increased to $881 million from $726 million; its year-end allowance was $2.0 billion, including the effect of adopting the CECL accounting standard. Used-vehicle prices rose about 3% in 2020, supporting lease termination gains; management expected prices to decline by a low-single-digit percentage in 2021.
- GM’s U.S. pension plans remained underfunded by approximately $5.4 billion. Lower discount rates contributed to actuarial losses, partly offset by investment returns. The filing identifies pension funding, recall estimates, sales incentives and lease residual values as judgment-sensitive areas.
Outlook, risks and contingencies
- 2021 guidance: GM expected diluted EPS of $4.50–$5.25, net income attributable to stockholders of $6.8–$7.6 billion and adjusted EBIT of $10.0–$11.0 billion. Guidance includes an estimated $1.5–$2.0 billion net adjusted-EBIT impact from the semiconductor shortage. Adjusted tax rate was expected to be approximately 24%.
- Investment and spending: GM committed to $27 billion of electric- and autonomous-vehicle investment through 2025 and plans to launch 30 EV models globally by then. It expected 2021 capital expenditures of approximately $9–$10 billion, with annual spending above $7 billion through at least 2023.
- Key risks: Semiconductor shortages were expected to materially affect 2021 performance and production; GM planned to prioritize full-size trucks, SUVs and EVs. Other material risks include renewed pandemic disruption, volatile vehicle demand, competition and pricing pressure, EV adoption and execution, autonomous-vehicle safety and regulatory approval, China exposure and joint ventures, supplier concentration, raw-material costs, emissions rules, cybersecurity, litigation and pension funding.
- Legal matters: Accrued litigation liabilities were $1.2 billion at year-end. The ignition-switch economic-loss class settlement received final approval, becoming binding in January 2021; GM’s contribution was approximately $70 million, plus eligible attorneys’ fees up to $35 million. The filing also discloses unresolved labor, emissions, tax and product-liability matters. It estimates reasonably possible indirect-tax losses above accruals of up to approximately $750 million; some other matters cannot be reasonably estimated.
- Subsequent event: In January 2021, Microsoft and other investors invested $2.2 billion in Cruise, including $1.0 billion from GM. GM disclosed an expected approximately $350 million valuation allowance against deferred tax assets in Q1 2021 following the investment.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether 2021 earnings guidance can be achieved despite the semiconductor shortage and the stated $1.5–$2.0 billion adjusted-EBIT headwind.
- Whether GM sustains GMNA’s strong margins and U.S. market share as production, inventories and vehicle demand normalize.
- Whether EV investment, launches and capital spending deliver expected returns, and whether Cruise can meet safety, regulatory and commercialization milestones.
- Whether recall, warranty, litigation and pension obligations exceed recorded estimates; review the $1.1 billion Takata accrual and $8.2 billion warranty liability in particular.
- Whether GM Financial’s credit losses, used-vehicle residual values and funding costs remain consistent with management assumptions.
- How to interpret non-GAAP measures, including adjusted EBIT and adjusted EPS, alongside their U.S. GAAP reconciliations.