General Motors Company — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. GM designs and sells vehicles and parts, provides financing through GM Financial, and develops autonomous-vehicle technology through Cruise. Comparisons with 2020 are against periods materially affected by COVID-19 shutdowns and disruptions.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $34.2B | $16.8B | $66.6B | $49.5B |
| Operating income (loss), GAAP | $2.9B | $(1.2)B | $6.2B | $(0.6)B |
| Net income (loss) attributable to stockholders | $2.8B | $(0.8)B | $5.9B | $(0.5)B |
| Diluted EPS, GAAP | $1.90 | $(0.56) | $3.93 | $(0.39) |
| EBIT-adjusted, non-GAAP | $4.1B | $(0.5)B | $8.5B | $0.7B |
- Q2 adjusted EBIT margin was approximately 12.0% of revenue; GM North America (GMNA) reported a 10.4% adjusted EBIT margin. Six-month GMNA adjusted margin was 11.2%.
- Q2 revenue recovery reflected higher vehicle volumes, favorable truck/SUV mix and pricing, including lower incentives amid low dealer inventories. Wholesale vehicle sales were 760,000, up from 421,000.
- Q2 GM Financial adjusted pretax earnings were $1.6B, versus $0.2B a year earlier. Higher used-vehicle prices drove $0.8B of lease-termination gains in the quarter. Six-month provision for loan losses was $33M, versus $793M in 2020.
- Six-month consolidated operating cash flow was $8.4B, versus cash used of $1.3B. Automotive operating cash flow was $2.9B, versus cash used of $7.7B; automotive capital expenditures were $2.4B.
- At June 30, cash and cash equivalents were $22.9B and marketable debt securities were $6.2B. Automotive and Cruise available liquidity was $42.0B, including $17.2B of available credit facilities. GM Financial reported separate available liquidity of $28.0B.
- Automotive debt was $17.3B and GM Financial debt was $93.6B. GM reported total assets of $241.8B and total equity of $57.9B.
Material changes and notable items
- GM increased its planned investment in electric and autonomous vehicles from $27B to $35B through 2025. June 30 inventory included $1.4B of vehicles manufactured without semiconductor modules.
- GM recorded $1.3B of Q2 recall-campaign warranty accruals, including $812M for the Chevrolet Bolt EV recall. The expanded Bolt remedy, announced in July, calls for replacement of battery modules; GM is seeking supplier reimbursement.
- Cruise issued $2.7B of preferred shares during the first half, including $1.0B invested by GM. The issuance contributed to Cruise becoming excluded from GM’s U.S. consolidated income tax returns and a $316M valuation allowance against Cruise deferred tax assets.
- Common dividends declared were zero in Q2; the six-month 2021 statement also shows no common dividends declared. Restrictions on common-share repurchases and dividends were removed after GM renewed credit facilities in April.
- GM Korea wage litigation led to a $107M additional accrual in Q2. The total accrual for that matter was $134M; a separate subcontract-worker matter had an approximately $260M accrual and an estimated $120M reasonably possible loss above accruals.
Outlook, commentary and risks
- For full-year 2021, GM forecast GAAP diluted EPS of $5.12–$6.12, adjusted diluted EPS of $5.40–$6.40, net income attributable to stockholders of $7.7B–$9.2B, and adjusted EBIT of $11.5B–$13.5B. Expected adjusted effective tax rate was approximately 24%.
- Management expected relatively strong 2021 GMNA adjusted margins, supported by pricing and strong U.S. industry sales, partly offset by higher commodity and raw-material costs. Planned 2021 capital expenditures were approximately $9B–$10B.
- Management said the semiconductor shortage would continue to disrupt production for the foreseeable future. It prioritized high-demand full-size trucks, SUVs and electric vehicles and did not expect the shortage to impact growth and EV initiatives; however, it warned that work-in-process inventory could affect year-end cash flow.
- Principal risks include semiconductor availability, COVID-19 and economic conditions, input costs, vehicle safety recalls, emissions and regulatory matters, autonomous-vehicle commercialization and safety, China and other international-market exposures, litigation, and pension funding requirements.
- GM estimated reasonably possible losses on indirect-tax matters above accruals of up to approximately $900M. It also noted that adverse outcomes in litigation and product-liability matters could exceed recorded accruals; some exposures could not be reasonably estimated.
- GM stated that all four credit rating agencies rated its corporate credit investment grade. Moody’s outlook was stable and DBRS’s outlook was positive; the other ratings were unchanged as of July 19, 2021.
Investor verification priorities
- Track semiconductor-related production interruptions, completion and sale of the $1.4B of unfinished vehicles, and any resulting cash-flow or guidance changes.
- Verify the final cost, timing and supplier recovery for the Bolt battery recall, and monitor other recall accruals.
- Assess how much GM Financial’s earnings depend on unusually strong used-vehicle prices and lease-termination gains, and monitor credit performance and loan-loss reserves.
- Compare full-year results with the 2021 EPS, adjusted EBIT, tax-rate and capital-spending outlook; distinguish GAAP measures from non-GAAP adjusted measures.
- Review developments in Korean labor litigation, indirect-tax claims, Takata matters and other product-liability proceedings, including exposures beyond recorded accruals.