General Motors Company — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless stated otherwise. GM designs and sells vehicles and parts worldwide, operates GM Financial, and invests in autonomous vehicles through Cruise. Amounts below are in U.S. dollars.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Total revenue | $32.474 billion | $32.709 billion |
| Operating income | $3.277 billion | $657 million |
| Net income attributable to stockholders | $3.022 billion | $294 million |
| Diluted GAAP EPS | $2.03 | $0.17 |
| EBIT-adjusted | $4.417 billion | $1.250 billion |
| EPS-diluted-adjusted | $2.25 | $0.62 |
- Revenue declined 0.7%, while operating income and adjusted EBIT increased substantially. Approximate operating margin rose to 10.1% from 2.0%.
- GM North America reported adjusted EBIT of $3.134 billion, up from $2.194 billion; margin was 12.1% versus 8.5%. Favorable pricing and vehicle mix more than offset lower wholesale volume and higher material, freight and engineering costs.
- GM International reported adjusted EBIT of $308 million versus a $551 million loss, including $308 million of equity income from China joint ventures versus a $167 million loss. Cruise recorded an adjusted loss of $229 million, little changed year over year.
- GM Financial reported adjusted pretax earnings of $1.182 billion versus $230 million. The improvement reflected a $492 million year-over-year reduction in loan-loss provision, higher gains on lease terminations, and lower interest expense; revenue declined 4.3%.
- Interest income and other non-operating income was $799 million, up from $311 million, primarily reflecting a $210 million gain on Stellantis warrants versus a $417 million loss in Q1 2020.
Cash flow, balance sheet and liquidity
- Consolidated operating cash flow was $1.266 billion, compared with $1.561 billion. Investing used $2.984 billion; financing provided $3.617 billion. Cash, cash equivalents and restricted cash totaled $24.876 billion at quarter-end.
- Automotive operations used $1.1 billion of operating cash and spent $0.9 billion on capital expenditures; adjusted automotive free cash flow was therefore approximately negative $2.0 billion. Automotive cash and marketable securities were $19.0 billion, and total available liquidity, including credit facilities, was $41.2 billion.
- GM Financial reported $29.2 billion of available liquidity. Its debt was $93.7 billion; automotive debt was $17.6 billion. These figures reflect different financing businesses and should not be treated as directly comparable measures of operating-company leverage.
- Total assets were $238.4 billion and total liabilities were $184.0 billion at March 31, 2021. GM reported $21.6 billion of cash and cash equivalents and $7.8 billion of marketable debt securities on the consolidated balance sheet.
- Automotive inventory rose to $12.1 billion from $10.2 billion, mainly because some vehicles were built without semiconductor-dependent components. Those incomplete vehicles had an inventory carrying value of approximately $1.2 billion.
- No common dividend was declared in Q1 2021; Q1 2020 declared dividends were $0.38 per share. In April, GM renewed or amended credit facilities and removed prior restrictions on common-share dividends and repurchases associated with the renewed facility.
Outlook, management commentary and risks
- For 2021, GM guided to diluted EPS of $4.28–$5.03, adjusted diluted EPS of $4.50–$5.25, net income attributable to stockholders of $6.8–$7.6 billion, and adjusted EBIT at the high end of a $10–$11 billion range. It expected the second half to be slightly better than the first half.
- Management estimated the semiconductor shortage would reduce 2021 adjusted EBIT by approximately $1.5–$2.0 billion. GM reported production interruptions and temporary plant suspensions, while prioritizing high-demand vehicles, including full-size trucks and SUVs. Management said the shortage was not expected to affect growth and EV initiatives.
- GM expected 2021 adjusted tax rate of approximately 24%; Q1 adjusted tax rate was 20.5%. Reported tax expense included a $316 million valuation allowance against Cruise deferred tax assets after Cruise’s preferred-share issuance changed its tax-consolidation status.
- GM’s strategy emphasizes electric vehicles, autonomous driving, trucks and SUVs, and software and services. Cruise raised $2.5 billion through preferred shares, including $1.0 billion invested by GM; Microsoft became Cruise’s preferred public-cloud provider. Commercialization remains subject to safety and regulatory requirements.
- Other material risks include COVID-19 uncertainty, higher commodity and raw-material costs, demand and pricing conditions, foreign exchange and geopolitical risks, regulatory and emissions requirements, labor and supplier disruptions, and product liability and recall exposure.
- At March 31, 2021, legal and tax-related accruals were $1.1 billion. Disclosed possible exposure above accruals included approximately $180 million for certain GM Korea wage litigation, approximately $120 million for certain subcontract-worker claims, and up to approximately $800 million for indirect-tax matters. The filing says losses in several other proceedings cannot be reasonably estimated. GM had accrued $1.1 billion for the GMT900 Takata airbag recall in late 2020 and considered it reasonable at quarter-end.
- GM stated it had substantial liquidity, remained in compliance with credit-facility covenants, and all four cited rating agencies rated its corporate credit investment grade. No material changes to the risk factors in its 2020 Form 10-K were reported.
Important facts for investors to verify
- Whether semiconductor availability, production recovery and the estimated $1.5–$2.0 billion 2021 EBIT impact align with the guidance assumptions.
- How durable Q1 pricing and mix, China joint-venture earnings, and GM Financial’s lower loan-loss provision and elevated used-vehicle values prove to be.
- Automotive cash generation and liquidity after planned 2021 capital expenditures of $9–$10 billion, EV investment, and other cash requirements.
- Potential changes in Cruise funding, ownership and tax treatment, and progress toward safe, permitted commercialization.
- Developments in Takata, product-liability, labor and indirect-tax proceedings, including possible losses beyond recorded accruals.