The GM logo is seen on the facade of the General Motors headquarters in Detroit on March 16, 2021.
Rebecca Cook | Reuters
DETROIT — Wall Street reacted to General Motors’ investor day on Tuesday with a shrug.
Executives used the Detroit automaker’s event to focus on broad, near-term updates to the company’s operations in an attempt to separate itself from its competitors amid more challenging market and economic conditions. But it did little to move the company’s stock.
GM believes it is in a unique position to outperform the industry and Wall Street’s expectations with its all-electric vehicles and traditional internal combustion engine vehicles. The company expects to improve profits for both types of vehicles as it targets adjusted earnings next year to be similar to 2024.
“It all starts there: scale, capital efficiency and cost discipline. These will differentiate us from others in our industry, and frankly, from our own past performance,” GM CEO Mary Barra said during the roughly three-hour event from its manufacturing operations in Spring Hill, Tennessee.
GM President Mark Reuss even took jabs at its traditional crosstown rivals Ford Motor and Stellantis. Without naming them, he said GM doesn’t need a “skunkworks” team to develop affordable EVs like Ford and that cutting to profitability, like Stellantis appears to be doing, doesn’t work.
Nonetheless, investors have largely failed to reward GM for being ahead of the curve for domestic EV production as well as outperforming many automakers in the profitability of its traditional gas- and diesel-powered vehicles.
Several Wall Street analysts were unchanged in their opinion and ratings of the automaker after the event, citing continued optimism but a lack of details in its overall strategy.
Shares of GM, Ford and Stellantis in 2024
“A missed opportunity — no strategy, just tactics. GM’s investor day showcased many of the company’s current achievements, but did not provide much insight on strategy,” Bernstein analyst Daniel Roeska wrote Wednesday in an investor note.
Others such as Barclays’ Dan Levy and BofA Securities’ John Murphy said while the event lacked some details, it fortified GM’s positioning compared to competitors.
“GM’s Investor Day yesterday didn’t provide much in the way of sharp shifts in strategy. However, we believe it served as a strong reminder of GM’s balanced and pragmatic approach — a thoughtful combination of ramping on EVs alongside a keen focus on execution and cost while continuing to generate robust shareholder returns,” Levy wrote in a Wednesday investor note.
Shares of GM closed Tuesday essentially unchanged at $46.01. The stock remains up nearly 30% this year, but it has been under pressure of late due to several downgrades and price target adjustments by Wall Street analysts.
Here are several topics investors should know from the event:
2025
GM expects its 2025 adjusted earnings to be in a “similar range” to the company’s results this year, CFO Paul Jacobson said.
Its targeted adjusted earnings before interest and taxes for 2024 were between $13 billion and $15 billion, or $9.50 and $10.50 per share, up from previous guidance of $12.5 billion to $14.5 billion, or $9 to $10 per share, earlier this year.
Through the first half of 2024, GM earned $8.3 billion in EBIT-adjusted and generated $6.4 billion in adjusted automotive free cash flow.
Jacobson said GM’s capital spend also is expected to be consistent in 2025 with this year. GM’s 2024 financial guidance includes anticipated capital spending of between $10.5 billion and $11.5 billion.
Peak EV losses?
Jacobson said GM’s earnings next year are also expected show narrower losses for electric vehicles — projecting they’ll decline by $2 billion to $4 billion.
The EV tailwinds next year for GM are split between savings from increases in volume and emissions and EV production credits, as well as lower costs, including for raw materials and battery production.
“We believe our EV losses peaked this year, and we’re focused on significantly improving profitability next year,” Barra said.
GM said it has lowered its battery costs by $60 per kilowatt hour this year from 2023. It expects to cut another $30 per kilowatt hour next year.
Barra said the automaker is on pace to produce and wholesale about 200,000 EVs for North America in 2024, achieving profitability on a production, or contribution-margin basis, by the end of this year. That guidance is down from a prior target of 200,00 to 250,000 EVs, which had been lowered from as high as 300,000 units.
Ultium
Ultium, which GM once touted as the ultimate solution for EVs, is ultimately dead.
GM will drop the “Ultium” name for its electric vehicle batteries and supporting technologies after spending years promoting the brand as it rethinks its EV and battery operations.
The company said the batteries and the technologies will remain, but the name will be gone, except in production operations such as its “Ultium Cells” joint venture plants with LG Energy Solution.
Instead, GM plans to use a variety of battery chemistries and cell designs, said Kurt Kelty, a former Tesla executive who joined GM as vice president of battery earlier this year.
“GM is evolving to a multifaceted approach,” he said. “This should only help GM strengthen our position of producing more EV models than any other automaker.”
ICE costs, profits
GM also expects to continue growing its sales and profits of traditional vehicles with internal combustion engines, or ICE, in the years to come.
“We expect the ICE industry is going to have a long tail and it’s going to be a significant part of our future,” Jacobson said.
2025 GMC Yukon AT4 Ultimate
GMC
The profit increases are expected to be assisted by some cost cutting, including consolidation of parts and options.
On average, GM is experiencing about a 10% reduction in total part numbers per vehicle, Reuss said.
Shareholder returns
Jacobson said GM will remain “active” in share buybacks following the conclusion this quarter of a previously announced initiative that’s expected to retire roughly 250 million shares of the automaker.
From 2022 through the end of 2024, GM will have returned about $20 billion to shareholders through share repurchases and dividends, Barra said.
The automaker is targeting to get below 1 billion outstanding shares by early 2025, Jacobson said. It has more than 1.1 billion outstanding shares as of Wednesday morning, according to FactSet.
Cruise and China
Wall Street was underwhelmed with GM’s updates regarding its embattled Cruise autonomous vehicle unit and operations in China.
GM’s operations in China have experienced a decade-long slide in earnings, and executives said they are discussing restructuring options with their China-based partners.
“In China, you’ll begin to see evidence of a turnaround this year, with a significant reduction in dealer inventory and modest improvements in sales and share,” Barra said.
Regarding Cruise, GM said its spending next year is not expected to top this year’s. It did not provide updates on its long-term plans for the troubled robotaxi business.
With GM’s investor day being two days ahead of Tesla’s highly anticipated robotaxi day, Wall Street analysts expected some sort of update on the venture, especially regarding future financing or capital spend for the company.
Other notes
- Hyundai Motor: When asked about GM’s announced non-binding memorandum of understanding with Hyundai, Barra said the teams “are working closely and making progress every week on what will become definitive agreements.”
- Chevy Bolt: GM said its next-generation Chevrolet Bolt EV that’s expected next year will be only slightly higher than the 2023 Bolt, which started at $28,795.
- PHEVs: GM reconfirmed plans to introduce plug-in hybrid electric vehicles, of PHEVs, in 2027. In the meantime, Reuss, citing single-digit market share, said GM is “not missing on anything right now without PHEVs.”
— CNBC’s Michael Bloom contributed to this report.
