General Motors Company — Q2 2023 Form 10-Q
Business context and reporting period
Quarter ended June 30, 2023. GM designs, manufactures and sells vehicles and parts, provides automotive financing through GM Financial, and is developing autonomous-vehicle technology through Cruise. Its reporting segments are GM North America (GMNA), GM International (GMI), Cruise and GM Financial. Amounts below are U.S. dollars.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 |
|---|---|---|
| Total revenue | $44.7 billion | $35.8 billion |
| Operating income | $2.8 billion | $2.1 billion |
| Net income attributable to stockholders | $2.6 billion | $1.7 billion |
| Diluted EPS | $1.83 | $1.14 |
| EBIT-adjusted (non-GAAP) | $3.2 billion | $2.3 billion |
- For the six months ended June 30, revenue was $84.7 billion versus $71.7 billion; net income attributable to stockholders was $5.0 billion versus $4.6 billion; diluted EPS was $3.52 versus $2.49. Six-month EBIT-adjusted was $7.0 billion versus $6.4 billion.
- Q2 GMNA EBIT-adjusted was $3.2 billion, with an 8.6% margin (8.0% in Q2 2022). GMI EBIT-adjusted was $236 million; Cruise reported an adjusted loss of $611 million; GM Financial reported adjusted pretax earnings of $766 million.
- Six-month operating cash flow was $10.7 billion versus $5.2 billion. Automotive operating cash flow was $9.3 billion; automotive capital expenditures were $4.5 billion.
- At June 30, cash and cash equivalents were $23.1 billion and marketable debt securities were $9.6 billion. Automotive available liquidity was $38.9 billion, including $13.5 billion of credit-facility availability. GM Financial available liquidity was $32.0 billion.
- Automotive debt was $16.4 billion and GM Financial debt was $101.6 billion at June 30. GM reported total assets of $275.8 billion and total liabilities of $199.9 billion.
Material changes versus the prior comparable period
- Q2 revenue increased 25%, led by higher automotive wholesale volumes and favorable pricing and mix, especially in North America. Six-month wholesale vehicle sales rose to 1.84 million from 1.65 million.
- Automotive costs increased, notably warranty and recall-related costs. Q2 automotive warranty expense, net of supplier recoveries, was $2.0 billion versus $598 million a year earlier; the six-month figures were $2.9 billion versus $1.1 billion.
- GM Financial adjusted pretax earnings fell 31% in Q2 and 36% for the first half. Higher finance income was more than offset by higher funding costs and lower lease income and lease termination gains.
- Cruise’s adjusted loss widened to $611 million in Q2 from $543 million, reflecting increased development costs.
- GM repurchased $869 million of common stock and paid $250 million in common dividends during the first half. Automotive available liquidity decreased $0.6 billion from year-end 2022.
Guidance, commentary, risks and unusual items
- For full-year 2023, management forecast net income attributable to stockholders of $9.3–$10.7 billion, EBIT-adjusted of $12–$14 billion, diluted EPS of $6.54–$7.54 and adjusted diluted EPS of $7.15–$8.15. Expected adjusted tax rate was 16%–18%.
- GM targeted $2.0 billion of annualized fixed-cost reductions by 2024; the voluntary separation program was expected to contribute about $1.0 billion. Management also identified another $1.0 billion of reductions to offset rising depreciation and amortization. It lowered 2023 capital-spending and battery-joint-venture investment guidance during the quarter; the filing does not state the revised total in the supplied text. Planned spending and battery-JV investment was described as $11–$12 billion in 2023 and $11–$13 billion annually in 2024 and 2025.
- Management cited higher interest rates, inflation, supply-chain and logistics constraints, commodity costs, competition and uncertain economic conditions. U.S. UAW and Canadian Unifor agreements were due to expire in 2023, creating potential labor-disruption risk. In China, GM reported lower market share and cited price competition, local-brand growth and regulatory pressures.
- Unusual charges included a $792 million Q2 charge following settlement of Chevrolet Bolt recall-cost reimbursement with LG; management said actual recall costs could be materially higher or lower. The company also recorded first-half restructuring charges including $875 million for its voluntary separation program and $345 million for Buick dealer strategy.
- GM accrued $150 million in Q2 in discussions with the EPA over greenhouse-gas credits; total related costs expensed through June 30 were $311 million, and additional losses could be material. Reasonably possible indirect-tax losses above accrued amounts were estimated at up to $1.6 billion. Other litigation and product-liability exposures may exceed recorded accruals, and some cannot be estimated.
- Management stated that current liquidity was sufficient and that all four credit agencies rated GM investment grade; Moody’s upgraded senior unsecured notes to Baa2 in March 2023. Management cautioned that full-year results exclude potential future adjustments, including work stoppages.
Important facts for investors to verify
- Whether GM achieves its 2023 earnings and EPS guidance as warranty costs, pricing, production and labor negotiations evolve.
- The final cost and supplier recoveries for the Bolt recall, and the scope and cost of other recalls, including ARC airbag matters.
- GM Financial credit performance, funding costs, used-vehicle residual values and lease termination gains; retail delinquencies over 30 days were 2.5% of receivables at June 30.
- Cruise commercialization progress, regulatory approvals, safety performance, cash use and available funding.
- Potential outcomes and financial exposure from EPA greenhouse-gas credit discussions, indirect taxes, litigation and other contingencies.
- Execution of cost reductions and EV investment plans, together with the impact of lower China market share and possible labor disruptions.