General Motors Company (GM) — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. GM designs, manufactures and sells vehicles and related services, operates autonomous-vehicle developer Cruise, and provides automotive financing through GM Financial. Amounts below are U.S. dollars; figures may not add due to rounding.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Total revenue | $40.0 billion | $36.0 billion; up 11.1% |
| Operating income | $2.58 billion | $2.20 billion |
| Net income | $2.35 billion | $2.81 billion |
| Net income attributable to GM stockholders | $2.40 billion | $2.94 billion |
| Diluted GAAP EPS | $1.69 | $1.35 |
| Diluted adjusted EPS (non-GAAP) | $2.21 | $2.09 |
| EBIT-adjusted (non-GAAP) | $3.80 billion | $4.04 billion |
| Net cash from operating activities, consolidated | $3.09 billion | $2.10 billion |
- Revenue and operating drivers: Automotive revenue increased 11.6% to $36.65 billion, primarily on price, volume and mix. GM Financial revenue rose 5.9% to $3.34 billion.
- Margins and segments: GMNA EBIT-adjusted margin was 10.9%, versus 10.7%. GMI margin was 9.3%, versus 9.9%. Cruise reported an adjusted EBIT loss of $561 million, compared with $325 million. GM Financial adjusted pre-tax earnings were $771 million, down 40%; higher funding costs and lower lease termination gains weighed on results.
- Cash generation and investment: Automotive operating cash flow was $2.2 billion and capital expenditures were $2.4 billion, implying adjusted automotive free cash flow of approximately negative $0.2 billion (management adjustments were insignificant). Consolidated investing cash flow was negative $2.26 billion.
- Liquidity: Automotive cash, cash equivalents and marketable securities totaled $21.4 billion; with available credit facilities, automotive available liquidity was $34.9 billion, down from $39.5 billion at year-end 2022. GM Financial available liquidity was $29.8 billion. Consolidated cash and cash equivalents were $18.23 billion; restricted cash brings cash-flow-statement ending cash to $21.14 billion.
- Debt: Automotive debt was $16.35 billion and GM Financial debt was $98.07 billion at quarter-end. GM redeemed $1.5 billion of automotive notes due October 2023. GM Financial issued $5.1 billion of securitization notes and $3.2 billion of senior notes during the quarter.
- Balance sheet: Total assets were $267.0 billion, total liabilities $192.8 billion, and total equity $74.0 billion at March 31, 2023. Inventories increased to $17.76 billion from $15.37 billion at year-end.
Material changes versus the prior comparable period
- Revenue grew 11.1%, while GAAP net income declined 16.4% and EBIT-adjusted fell about 6%. GM attributed cost pressure to warranty and campaign costs, engineering, materials and freight, and the voluntary separation program.
- Diluted GAAP EPS increased to $1.69 from $1.35, and adjusted EPS rose to $2.21 from $2.09. The comparison in GAAP EPS reflects, in part, a $909 million deemed dividend associated with Cruise preferred-share redemption in Q1 2022, which reduced 2022 earnings available to common stockholders.
- GM Financial adjusted earnings declined as interest expense increased with higher benchmark rates, credit spreads and average debt. Lower lease income and smaller lease termination gains also offset stronger finance charge income.
- Automotive available liquidity decreased by $4.6 billion, including capital spending, debt redemption, shareholder distributions, investments and reduced credit-facility capacity.
- Warranty expense, net of supplier recoveries, increased to $966 million from $548 million, including higher adjustments to pre-existing warranties.
Outlook, management commentary and risks
- 2023 guidance: Net income attributable to stockholders of $8.4–$9.9 billion; EBIT-adjusted of $11.0–$13.0 billion; diluted GAAP EPS of $5.83–$6.83; adjusted diluted EPS of $6.35–$7.35. GM expected an adjusted effective tax rate of 16%–18%.
- Management targeted $2.0 billion of annualized fixed-cost reductions by 2024. The voluntary separation program and performance-based exits were expected to contribute about $1.0 billion of annualized savings. Q1 restructuring-related additions included $875 million of VSP charges and $99 million for Buick dealer actions; GM expected related cash outflows to be substantially complete by year-end.
- GM expected relatively strong 2023 North American adjusted margins, supported by pricing and U.S. demand, but subject to commodity, raw-material and logistics costs, supply-chain recovery and economic conditions. Management noted that improved availability could lead to higher incentives as the year progresses.
- GM plans capital spending and battery-joint-venture investment of approximately $11–$13 billion annually through 2025. It cited higher interest rates, inflation, competition, foreign-exchange and geopolitical uncertainty, China market pressure, supply-chain risks and 2023 labor-agreement negotiations as key uncertainties.
- Contingencies include a $1.1 billion accrual for litigation-related and tax administrative matters; reasonably possible indirect-tax losses in excess of accruals of up to approximately $950 million; and a $261 million accrual for specified GM Korea subcontract-worker claims, with an estimated $94 million reasonably possible excess for certain other current-worker claims. Potential greenhouse-gas-credit adjustments could be material, but GM could not estimate the cost. Additional exposure from other lawsuits and recalls was also not quantifiable in the filing.
- GM said all four credit agencies rated its corporate credit investment grade; Moody’s upgraded senior unsecured notes to Baa2 from Baa3 in March. Management reported compliance with credit-facility covenants and effective disclosure controls as of March 31, 2023.
Important facts for investors to verify
- Whether GM can meet its 2023 earnings guidance while managing warranty costs, incentives, input costs and supply-chain constraints.
- Progress and realized savings from the $2.0 billion annualized cost-reduction target, including the cash timing of VSP obligations.
- Automotive cash generation and capital investment needs, including battery-joint-venture funding, and the sustainability of available liquidity.
- GM Financial credit quality, loan-loss allowances, funding costs and lease residual values as used-vehicle prices moderate.
- Developments in material legal, tax, emissions-credit and product-liability matters, including exposures that GM says cannot currently be estimated.
- China JV performance and competitive position, and Cruise’s commercialization, regulatory approvals, operating losses and funding requirements.