General Motors Company — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; comparative period is Q1 2012. Amounts are U.S. dollars unless stated otherwise. GM designs, manufactures and sells vehicles and parts globally, and provides automotive financing through GM Financial.
Financial performance
| Metric | Q1 2013 | Q1 2012 | Change |
|---|---|---|---|
| Total revenue | $36.9 billion | $37.8 billion | Down 2.3% |
| Operating income | $959 million | $996 million | Down 3.7% |
| Income before tax and equity income | $1.039 billion | $1.143 billion | Down 9.1% |
| Net income attributable to stockholders | $1.175 billion | $1.315 billion | Down 10.6% |
| Net income attributable to common stockholders | $865 million | $1.004 billion | Down 13.8% |
| Diluted earnings per common share | $0.58 | $0.60 | Down $0.02 |
| Operating cash flow, consolidated | $819 million | $2.499 billion | Down $1.680 billion |
Automotive gross margin was $3.727 billion, or approximately 10.3% of automotive revenue, versus $4.418 billion, or approximately 11.8%, a year earlier. Consolidated operating margin was approximately 2.6%. Equity income from unconsolidated affiliates rose to $555 million from $423 million, principally reflecting stronger China joint-venture earnings.
Balance sheet, debt and liquidity
- At March 31, 2013, cash and cash equivalents were $20.643 billion and marketable securities were $6.560 billion. Total assets were $153.775 billion; total liabilities were $115.440 billion; total equity was $38.335 billion.
- Automotive debt was $5.175 billion and GM Financial debt was $13.249 billion, for approximately $18.4 billion combined. GM Financial debt includes securitization notes and borrowings supporting its finance receivables and leasing operations.
- Automotive available liquidity was $35.309 billion, including $24.306 billion of cash and current marketable securities and $11.003 billion available under credit facilities. GM Financial separately reported $3.005 billion of available liquidity.
- Automotive pension liabilities were $26.775 billion; other postretirement benefit liabilities were $7.246 billion.
Material changes and operating results
- Revenue declined primarily from lower wholesale volume, unfavorable foreign exchange and pricing/incentives, partly offset by favorable vehicle mix and higher GM Financial income. Worldwide wholesale volume fell to 1.554 million from 1.594 million vehicles.
- GM North America EBIT-adjusted was $1.414 billion, down from $1.642 billion. GM Europe’s adjusted loss improved to $175 million from $294 million, but management expected continued regional losses and no significant near-term improvement in market conditions.
- GM International Operations EBIT-adjusted was $495 million versus $521 million. GM South America reported an adjusted loss of $38 million versus adjusted income of $153 million, affected by currency movements and the absence of a prior-year bargain-purchase gain. GM Financial pretax income was broadly flat at $180 million despite revenue growth of 25.3%.
- No goodwill impairment was recorded in Q1 2013, compared with $617 million in Q1 2012. Q1 2013 earnings included a $162 million charge from Venezuela’s currency devaluation.
- Consolidated operating cash flow fell to $819 million. Automotive operating cash flow was $543 million; after $1.939 billion of automotive capital expenditures, automotive free cash flow was negative $1.396 billion. Management cited lower earnings, rental-car activity, working capital and dealer/customer allowances.
- GM changed its segment reporting basis to the geography where vehicles are sold to third-party customers and retrospectively revised comparative segment data.
Outlook, management commentary and risks
- GM said existing liquidity and operating cash flows should meet liquidity needs, while identifying substantial planned uses of cash, including approximately $8 billion of annual capital expenditures, debt service, preferred dividends of about $0.8 billion annually, and acquisitions.
- GM Financial completed most of its acquisition of Ally Financial’s European and Latin American finance operations on April 1, 2013, paying approximately $2.4 billion and repaying an assumed $1.3 billion loan. Remaining acquisitions, including France, Portugal, Brazil and an interest in China’s GMAC-SAIC, were subject to approvals and expected in 2013 or early 2014; expected further payment was approximately $1.8 billion.
- In April 2013 GM paid approximately $696 million to redeem GM Korea preferred shares with a carrying amount of about $460 million and recorded a $236 million extinguishment loss after quarter-end.
- GM Financial’s consumer receivables more than 30 days delinquent or in repossession rose to 6.1% of contractual amounts from 4.7% a year earlier. Its allowance for post-acquisition loan losses increased to $393 million from $208 million.
- Key risks include prolonged European weakness, foreign-exchange controls and further Venezuelan devaluation, product quality and recall exposure, pension assumptions, financing availability, supplier continuity, China market conditions, and execution and integration of the finance acquisitions.
- Contingencies include a $699 million accrual for GM Korea wage litigation involving more than 10,000 employees; GM disclosed a $450 million reasonably possible loss in a UAW claim with no accrual. Environmental remediation losses were estimated at $120 million to $250 million. The filing also discusses other litigation and tax matters; adverse outcomes could exceed recorded accruals.
- GM reported no material changes to the risk factors or legal proceedings disclosed in its 2012 Form 10-K. No formal earnings guidance was provided in the supplied filing text.
Important facts for investors to verify
- Whether North American profitability and margins can recover from lower volume, launch costs and pricing pressure.
- Whether European losses continue and whether restructuring and planned spending milestones are achieved.
- The cash-flow effect of capital spending, preferred dividends and the remaining Ally Financial acquisitions, and the resulting GM Financial leverage and liquidity.
- Trends in GM Financial delinquencies, charge-offs, loan-loss provisions and securitization funding access.
- Potential additional effects from Venezuelan currency controls or devaluation, and outcomes of material legal, tax and environmental matters.